Fed: Tax exemptions a capital gain for the rich
By Karlis SalnaWed Sep 23 02:25:45 EST 2009
Tue Sep 22 16:25:45 UTC 2009
Eds: Embargoed until 0001 AEST Wednesday, September 23
CANBERRA, Sept 23 AAP - The tax treatment of owner-occupied dwellings is far too generous and the biggest beneficiaries are the wealthiest people in the community, according to The Brotherhood of St Laurence.
They say high-income earners enjoy the lion's share of tax breaks on housing of $45 billion.
Most of the $45 billion in the annual subsidy - about $30 billion - is due to exemptions for owner-occupied homes from capital gains tax.
The issue was raised in the group's submission to the Henry Review of the tax system.
A joint report, by the Brotherhood and the Australian Housing and Urban Research Institute, shows the average benefit from capital gains tax exemptions for the top 20 per cent of incomes is almost seven times greater than for the bottom 20 per cent.
The sale of owner-occupied residential property is normally exempt from capital gains tax, except for gains realised during a period in which the property was not being used as a personal residence.
The report also shows that for all owners and renters in the same top income bracket the average annual benefit from exemption of the family home from capital gains tax is more than $8,000 per year.
But households in the lowest income bracket receive an average annual benefit of $1,200.
The benefits for owners in the top bracket are even greater, with the average annual benefit of the capital gains tax exemption more than $10,000.
Households in the top income bracket also receive an average benefit of about $1,500 per year from the exemption of the family home from land tax, more than nine times the average annual benefit of $160 for households in the lowest income bracket.
For owners in the top bracket, the average annual benefit of the land tax exemption is around $1,800.
Brotherhood of St Laurence executive director Tony Nicholson said the tax concessions were unfair, wasteful and actually put home ownership out of reach for many Australians.
"Clearly the concessions are very unevenly distributed throughout the community, with the owners of the most expensive properties and with the highest incomes getting much more benefit than anyone else," Mr Nicholson said.
The Brotherhood said the current policy regime had a number of significant adverse effects and subsidised home owners, not home ownership.
Subsidies to rental investors added to upward pressures on dwelling prices and contributed to affordability constraints faced by would-be first-home buyers, the group said.
Mr Nicholson said there was a wealth of evidence to suggest that current policies actually increased the cost of housing for disadvantaged Australians.
"The favourable tax treatment of property ratchets up what people are prepared to pay, and consequently leads to higher housing prices," he said.
The Brotherhood says the indirect assistance provided through tax expenditures continues to be poorly targeted, providing the greatest assistance to established home owners and the least to renters and to young purchasers.
The report recommends owner-occupied housing be removed from land tax exemptions; capital gains be taxed on homes worth more than $1.1 million; death duties be reintroduced; and/or that losses on income earned from rental property be ring fenced.
The Brotherhood of St Laurence-AHURI report is based on estimates using 2005-06 data.
