New CGT Call On Australia's Largest Houses

by Mary Swire, Tax-News.com, Hong Kong

24 September 2009

The Brotherhood of St Laurence, an Australian anti-poverty welfare institution, has called for an overhaul of Australia’s tax treatment of the most expensive homes based on the findings of its joint report with the Australian Housing and Urban Research Institute.

It concludes that the biggest beneficiaries of tax concessions on housing are the wealthiest in the community. The report, entitled "Tax Expenditures and Housing," finds that, while the tax system provides indirect assistance to owner-occupiers worth about AUD45bn (USD39bn) annually, AUD30bn is due to the exemption of owner-occupied homes from capital gains tax.

Tony Nicholson, the Executive Director of the Brotherhood of St Laurence, said: “The tax concessions on owner-occupied housing are unfair, wasteful, actually help put home ownership out of reach for many Australians and are in dire need of reform. We urgently call on the federal government to remove the capital gains tax exemption on homes worth more than AUD1.1m, which at roughly 2% of all owner-occupied dwellings is at the very top end of the property market.”

“Over time, state governments should consider removing the exemption from land tax for very expensive owner-occupied dwellings while at the same time removing or reducing stamp duty on lower-priced homes,” he continued. “Any resulting revenue gain should be used to fund measures to make housing more affordable for those in need, including providing more public and non-profit housing and more generous support for those on rent assistance.”

He added: “A particularly disturbing finding of the report is that for households in the top 20% of incomes, the average annual benefit of the exemption from capital gains tax on owner occupied housing is worth AUD8,000. That is almost seven times the benefit of AUD1,200 for households in the lowest 20% of incomes.”

The report itself also reiterates that a package of measures may be necessary, at both federal and state levels of government. Those would include not only the taxation of owner-occupied land values but also the re-introduction of death duties, from which the family home would not be exempt.

The report is expected to be put before the Henry review of Australia’s tax system. However, in a press release last month, Australia’s Treasurer, Wayne Swan, had had to describe as “factually incorrect” press reports that the government was considering the introduction of a capital gains tax on family homes. It had been suggested that, as part of the Henry review, the government had requested the Treasury to model proposals for a capital gains tax on family homes valued at AUD2m or more.

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