Your Home: The Tax Haven That Never Was
SPIN: The Family Home is exempt from land tax. (And all the people shall say: Amen.)
FACT: If home buyers don’t have to pay land tax, they can afford higher mortgage repayments, hence higher prices. While the price of a house is limited by the cost of construction and by competition among builders, a home is not just a house; it also includes land, which is a limited natural resource, and whose price is therefore determined by what people are willing and able to pay for it. So there is nothing to stop higher land prices from absorbing the entire benefit of the tax “exemption”, in which case the buyer still pays the tax — to the seller instead of the government!
SPIN: The Family Home is exempt from capital gains tax. (And all the people shall say: Amen.)
FACT: If you don’t have to pay capital gains tax on your old home, you can afford to pay more for the new one. So you do!
SPIN: The Family Home gets concessional treatment in assets tests on welfare payments. (And all the people shall say: Amen.)
FACT: The “concessional” treatment of the home increases the attractiveness of investing in the home and therefore increases its price. The benefit to incumbent owners comes at the expense of first-time buyers.
SPIN THIS IF YOU CAN: When you go bankrupt, why are your creditors allowed to take your home but not your superannuation? Because the tax and welfare systems treat your home more “generously” than your super! If your creditors could take your super, they’d be taking some of it from the government through the effect on your tax liabilities and welfare entitlements; but when they take your home, they’re taking nearly all of it from you. If your home were less “protected” from the government, the government would be more inclined to protect it from your creditors!