Australia: Home buyers lose out in tax change
Ironically new home buyers are constituents the Rudd Government has championed since its election.
Property Council of Australia director Trevor Cooke said certain housing developers would now pay a greater proportion of their income in GST and would pass on that cost to buyers.
"In its present form, this change will add to the cost of new housing," Mr Cooke said. "It's hard to imagine developers will be able to absorb the full cost."
The Treasury estimates the changes will reap $620 million in revenue over four years. "That money will have to come from someone," Mr Cooke said.
Under the old scheme, developers would pay GST on the difference between the sale price and the price paid for occupied land that is a "going concern". Under the new scheme, they would pay GST on the difference between the sale price and the price paid to the original land owner.
For example, apartments sell for $10.5 million. A developer bought the flats site from a factory owner for $5 million. The factory owner bought it from a farmer for $500,000. Under the old scheme, the developer would pay GST on $5.5 million. Under the new scheme, they would pay GST on $10 million.
Prosper Australia director Karl Fitzgerald said the former system was preferable, particularly when houses were demolished to make way for apartments.
The margin scheme was fair. It was designed to stop GST being applied to the non-GST part of land and dwellings used as exempt housing but later taken over by a developer," Mr Fitzgerald said. "Without the margin scheme . . . GST is being clawed out on the way through as housing goes from a family to a unit dweller via a developer.
Cheers!