This research is the final report of the AHURI inquiry into ‘Pathways to Housing Tax Reform in Australia.’ It features real-world modelling and implementation time frames to steer tax settings that progress the efficiency, equity and sustainability of housing tax policy, and also presents meaningful long-term political pathways to achieve these outcomes.
Lack of access to and secure tenure within affordable housing are significant problems in Australia. Local, state and national taxes currently applied to housing contribute to these poor outcomes.
There is a consensus that coordinated, well-designed reforms to the treatment of housing in the tax and transfer system can make a significant contribution to improving housing outcomes. However, the prospects of achieving significant reform are diminished by formidable political barriers.
The Inquiry proposes a housing tax reform pathway informed by a political economy approach that seeks to balance technical reform objectives with political imperatives. The pathway is organised into sequential phases over a 10–15 year timeframe. When implemented, reforms will contribute to enhancing residential mobility, improving housing accessibility and affordability, reducing incentives for short-term investment in residential property, and improving rental supply and security.
The pathway would proceed as follows:
establish the conceptual and administrative foundations for a national reform agenda while building community consensus around the broader objectives of reform
develop and implement new policy frameworks with settings designed to minimise the impact on government budgets and housing markets
incrementally modify policy settings to shift tax distribution to owners of high value properties to improve access and affordability in the Australian housing market.
"One of our key findings is that gradually reducing the generosity of capital gains tax and negative gearing provisions over a decade long timeframe would result in only a modest impact on the after-tax return from housing investments for most ‘mum and dad’ investors, with the exact figures depending on wage income, interest rates and capital growth." — Professor Richard Eccleston, from the University of Tasmania.