It’s been policy parkour over the past few weeks. Like those agile French kids jumping, vaulting and somersaulting over street barriers, the Federal Government has been exercising new policy muscles.
Policies have hurtled out of several independent inquiries and the Federal Treasury.
There’s been the release of the Henry tax review and the Rudd Government’s response; the Johnson report on Australia as a Financial Centre; the Board of Taxation report into reforming managed investment trusts (MITs), along with the Government’s response.
Let’s not forget various instalments of the Cooper review into Australia’s superannuation system, with a final report due on June 30 this year.
And then there’s the Federal Budget.
We’ll examine the Johnson and MIT reports in a future editorial.
In short, they deliver great news for the property industry. Once implemented, Australia will boast a more elegant, competitive framework for managing investment trusts that’s superior to any in the world.
Other rule changes will transform the Australian property industry into a more powerful magnet for the world’s savings.
The Property Council website (www.propertyoz.com.au) provides a comprehensive analysis of the reports.
The Federal Budget disappointed many.
For the record, the Property Council wanted to see far more on nation-building infrastructure, housing supply and tax
incentives for retro-greening buildings on a mass scale.
Nevertheless, there are significant positives in the budget:
- Australia is better placed to move into the black earlier – fiscal responsibility will temper inflation flare-ups and interest rate hikes
- The Government is re-directing CPRS money to a new $652.5 million fund that will address renewable energy and energy efficiency, including incentives for property owners
- The Government announced several measures that will encourage deeper and more liquid debt markets, including
a corporate bond regime
- Finally, the budget welds together several critical elements proposed in the Henry, Board of Tax and Johnson reviews. In particular, it outlines a timetable for increasing super to 12 percent and educing the corporate tax rate to 28 percent.
A highlight of the recent spate of policy parkour was the Henry Review.
Henry has defined the tax agenda for the next decade.
In doing so, he’s provided us with an advocacy platform, particularly on state and territory tax reform.
Here’s a sample of his definitive statements:
“Stamp duties on conveyances are inconsistent with the need for a modern tax system … they are volatile and highly inefficient and should be replaced with a more efficient means of raising revenue.”
The report says transaction taxes are “highly inefficient and inequitable” and that “stamp duties are a particularly bad
tax on business”.
Consumers are also impacted: “higher tax rates apply to those goods and services that disproportionately depend on property for their production.”
The Henry report notes that the effective property tax rates for capital city homes is 87 percent, with Darwin on 126 percent.
It then states that effective property taxes on business are worse.
The Henry report makes clear that certain real estate taxes are potentially efficient, but that cynical state government policies distort the system.
In response, Federal Treasurer Wayne Swan says the Federal Government won’t extend land tax to the family home.
However, he says he’d include real estate tax reform in future waves of reform, depending on negotiations with the states.
We’ve said real estate taxes should front a second wave of reforms.
Within a fortnight of the Henry report, the NSW Government conjured up a new transaction tax – and we all thought vendor duty was the world’s dumbest tax.
The NSW property tax grab pants on the heels of the Queensland Government’s efforts to redefine ‘unimproved’ to include improvements – success, hard work, goodwill, etc.
The Property Council and Shopping Centre Council (along with many allies) persuaded the Bligh Government to drop this skewiff proposal.
Henry said poor real estate taxes are bad for the country – Australia needs one efficient real estate tax. Maybe he was thinking of these recent examples of policy venality:
- A tax on a property developer to relocate kangaroos by helicopter (to minimise stress) after paying to desex them
- Parking levies that keep doubling even though less than 5 percent of tax income pays for congestion reduction programs
- A development requirement to pay for stacks of non-standard light poles for the next couple of decades (and pay for
their storage until they’re needed)
- Water authority drainage fees charged on gross rental value rather than drainage area or volume
- Ambulance levies collected on the basis of an electricity bill – the very definition of an unfair charge
- Utility augmentation connection taxes – you get to pay for service upgrades 10 suburbs away.
The lesson is that governments will keep coming back to the property well with dopey taxes unless we fix the entire show –only a radical solution will work.
We’ve commissioned KPMG Econtech, the Federal Treasury’s own advisors, to model our preferred real estate tax solution against the current ramshackle system and Dr Henry’s proposals.
Then we’ll need a brace of parkour skills to persuade all spheres of government to take the plunge.
Peter Verwer |
Tuesday, 1 June 2010 12:01 AM |
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