Removal of NSW land tax indexation amounts to tax grab by stealth

The removal of land tax indexation at the centre of tomorrow’s  NSW Budget amounts to a tax grab by stealth which will exacerbate the  housing crisis for those who can least afford it, the Real Estate Institute of NSW  (REINSW) says. 

REINSW CEO Tim McKibbin says the NSW Government’s plan to let the inevitable  increase in property values do the work of increasing taxes will end up hurting a familiar  cohort: renters.

“Given the high cost of holding a residential property, adding to the tax burden will only  place additional pressure on investment returns, leaving landlords two undesirable  options. They can either pass the extra cost onto tenants or sell their investment  property, taking more homes out of an undersupplied rental market,” Mr McKibbin says.

“This move will have the same effect as not indexing the stamp duty brackets. It is a tax  grab by stealth and at a time when we desperately need to encourage investment in  residential property, increasing tax will have the complete opposite effect.

“Similarly, removing land tax indexation will have severe ramifications for commercial  tenancies. Landlords will pass on the additional land tax to the tenant and with  businesses already doing it tough, many will find the higher costs too much to bear.

“REINSW has consistently called for property tax reform as a critical part of a  coordinated solution to address the housing crisis in NSW. But instead of tax reform, all  we get is more tax, and more broken promises,” Mr McKibbin says.

Mr McKibbin says that while increasing the tax burden on foreign investors may be politically popular, deterring investment in the state’s rental market may likewise not be  in the best interest of tenants. 

“For people struggling simply to find a home to rent, whether the landlord is local or  foreign seems largely irrelevant, and if only 0.6% of NSW housing stock is foreign owned, reform in this narrow area is immaterial,” he says.

The boost in investment in better training for town planners to be detailed in tomorrow’s  Budget is, on the surface, a welcome measure for a housing market crippled by housing  supply delays. However, the REINSW says it’s a move which addresses the symptoms  while ignoring the cause. 

“At face value, the investment in better planning and technology to expedite  development approvals is a positive move which recognises the unacceptable delays  plaguing the housing supply response. But in reality, it ignores the root cause of the  problem,” Mr McKibbin says.

“Government needs to impose service level standards on Councils rather than treating  them as an unaccountable monopoly. For Councils themselves, it’s time to rise above  local politics and accept that to accommodate an increasing population we need to  accept higher density living.
 
“Building high quality, higher density properties adjacent to or above transport routes is  the future. It’s incumbent on Councils to either deliver this in their local Government  areas, or be alleviated of the responsibility,” he says.