“One of the main contributors to the cost housing is the significant tax added to build a house. The Federal Budget is an opportunity to reform the way home building is taxed to increase the supply of new housing and improve affordability,” said Jocelyn Martin, HIA Deputy Managing Director – Policy and Industry.

“Taxing housing only contributes to less houses being built causing rentals to increase and home ownership to decline.”

In 2019, the Centre for International Economics (CIE) released a research report Taxation on the Housing Sector which identified the costs associated with bringing land and housing to market and provided a breakdown of these costs as either resource costs, regulatory costs (red tape), statutory taxes (federal, state and local) or excessive charges.

The research showed that the combined costs of the statutory taxes, regulatory costs and excessive charges equate to 50 per cent of the cost of a new house and land package. The situation since 2019 has only worsened.

“While many of the taxes are applied by local and state governments, there are a range of federal financial relations mechanisms that could be used to leverage reforms that directly impact the price of new housing.

“The tax that has a direct impact on home ownership is stamp duty. The often large one-off tax is a major barrier to first home buyers getting into a new home. The added cost of stamp duty often means the difference of being able to buy or not.

“The Government needs to lead the way via National Cabinet and encourage the states and territories to universally drop stamp duty and replace it with another more equitable and affordable tax.

“There are also many examples of cascading taxes where a tax paid at one point in the process of bringing a new home to market forms part of the taxable value at a subsequent stage of development further eroding affordability.

“With the Federal Budget just around the corner, HIA believes the opportunity needs to be now for the Federal Government to enter into frank discussions with the states and territories around tax reforms for home building.

Addressing the way the industry and home buyers are taxed is key to bringing the problem of housing affordability under control,” concluded Ms Martin.