- State and local governments have been delivered a massive tax windfall from Australia’s housing boom, especially in New South Wales and Victoria.
- Last financial year, 52.8% of all revenues for state and local governments came from property taxes, the highest proportion on record.
- CoreLogic expects property-related tax revenues are likely to weaken in the current financial year given softer housing market conditions.
State and local governments have been delivered a massive tax windfall from Australia’s housing boom, especially in New South Wales and Victoria.
Just take a look at the chart below from CoreLogic showing annual revenue from property taxes going back to the start of the century.
Just like prices, the total tax take has surged, doubling in just over a decade.
“Over the 2016-17 financial year, state and local governments collected $52.5 billion in taxes from property with the figure climbing by 5.9% over the year,” CoreLogic said, referring to data released by the Australian Bureau of Statistics (ABS).
“The taxation take from property is now more than double what it was in 2005-06.”
Within that figure, the group said that taxes on immovable property — such as land tax, municipal rates and other smaller taxes — stood at $29.185 billion, up 7.9% on one year earlier.
Taxes on financial and capital transactions — predominately stamp duty — rose by 3.6% to $23.338 billion over the same period.
This table from Corelogic breaks down annual tax revenues received by individual state and territory governments over the past decade. The figures are shown in millions.
After crunching the numbers, CoreLogic found that 52.8% of all tax revenue for state and local governments last financial year came from property.
That was the highest percentage on record.
While the east coast property boom has delivered a revenue boom for the New South Wales and Victorian state governments, especially for stamp duty receipts, as CoreLogic points out, it also creates a concentration risk for revenues should conditions in those markets soften for an extended period.
“The cyclical nature of housing market transactions make stamp duty a volatile source of revenues for state governments,” it says, pointing to the example seen in Western Australia where stamp duty receipts as a percentage of total property-related revenues slumped to 28.5% last financial year, down from 54.5% of revenues as the peak of its housing boom in 2007/08.
With the group expecting housing market conditions in both New South Wales and Victoria to soften, CoreLogic says property-related tax revenues will likely decline for both state governments over the current fiscal year.
“Over the second half of 2017 and into 2018, we have seen residential housing markets weaken with values and transactions falling,” it says.
“As a result, we would expect over the current financial year that stamp duty revenue will fall and, as a result, so will property taxation revenue.”
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