02 May 2010
The Henry Tax Review, released today, has backed developer concerns on planning rules and development levies, according to the Urban Taskforce.
The Taskforce’s chief executive, Aaron Gadiel said, the review considered key issues that were dampening urban development and crippling Australia’s housing supply.
Planning rules
Mr Gadiel said, the Henry Report makes it clear that the current supply of housing is insufficient, placing upward pressure on home prices.
The report finds that higher home prices are the likely consequence of restrictions on the supply of housing that result from zoning, lengthy approval processes and building code and other standards imposed on building quality.
“We welcome the report’s call for a serious community dialogue on these issues,” Mr Gadiel said.
“The dialogue can’t wait any longer and all levels of government must now focus on this issue.”
Infrastructure charges
Mr Gadiel said, the Henry report had vindicated developers by finding problems in the way that infrastructure charges were being imposed on new development.
“The report said levies that were complex, non-transparent or set too high, discourage investment in housing, lower the overall supply of housing and raise its price,” Mr Gadiel said.
“The report criticised planning rules that make development approval contingent on development charges of uncertain size, finding that the increased risk can affect project viability.
“This is the highest level recognition we’ve had that developer charges are undermining investment in new urban development.”
Betterment taxes
Mr Gadiel said the report exposed the fact that many so-called ‘infrastructure charges’ were in fact merely thinly disguised betterment taxes.
“We welcome the report’s clear statement that infrastructure charges should not be about taxing the profit of development.
“This will undermine many so-called infrastructure levies imposed willy-nilly by local councils.
“Local councils have been loading up infrastructure levies with non-essential capital projects merely to ‘capture’ perceived developer profits.
“This process has killed projects, because without profits, there is no incentive for the private sector to build.
“If government acts on this aspect of the report, there will need to be a major re-think of the existing approach to development levies.”
Stamp duties
Mr Gadiel said the admission that existing State stamp duties, on property conveyances are highly inefficient and that they distort both residential and business use of property, was inevitable.
“The next step is for state and federal government to actually do something about it,” he said.
“They can start by limiting stamp duty to land value only when off-the-plan sales contracts are entered into.
“This has worked in Victoria and would help reduce distortions across the rest of the country too.”
Land Tax
Mr Gadiel said that state governments should take a hard look at themselves on the issue of land tax, following the findings of the Henry review.
The report finds that levying higher land taxes on larger holdings discourages investment in rental housing by institutional investors.
The report also finds that land tax rates should be based on the value of a given property, so that the tax does not discriminate between different owners or uses of land.
“Developers holding land for re-development are bearing high land taxes, which are exacerbated by delays caused by the planning system.”
Negative gearing
Mr Gadiel said the Federal Government was right to rule out today the Henry report’s proposals to reduce the value of negative gearing in securing investment in new rental properties.
“Investment returns in the Australian residential housing market are likely driven by capital gains rather than by rental yield,” Mr Gadiel said.
“Reducing net rental losses and capital gains tax concessions would have reduced residential property investment.
“Even the Henry review admits that changing the taxation of investment properties could have had an adverse impact in the short to medium term on the housing market.
“The report concedes that in a market facing supply constraints, these reforms could place further pressure on the availability of affordable rental accommodation within the private rental market.”
“The Federal Government was correct to decisively rule out proposed reductions in the capital gains tax discount and any proposal to discount negative gearing deductions.”
Infrastructure fund
Mr Gadiel welcomed today’s announcement by the Federal Government that there would be a new infrastructure fund to help the states to invest in “nation building infrastructure necessary to support improved living standards”.
“However, we’re concerned that, from day one, this fund is to be biased to resource-based infrastructure required by the mining industry,” Mr Gadiel said.
“There is a desperate need for a permanent annual funding allo cation by the Federal Government for large scale urban infrastructure projects, such as public transport and motorways.
“It seems that this fund will not be focused on these vital needs.”
The total amount of the infrastructure fund will start at $700 million in 2012-13 and will apparently grow over time.
The Urban Taskforce is a property development industry group, representing Australia’s most prominent property developers and equity financiers.
The construction activity made possible by property developers contributes $78 billion to the national economy each year and creates 849,000 direct jobs.
