The Western Australian issue with the GST rate has unearthed a debate on many of the other taxes on property purchases, with some commentators saying they impede growth
It’s lonely on the West Coast. Surrounded by desert, and time zones away from Australia’s largest cities, Perth can stake a claim to being the most isolated major city in the world – or at least in the southern hemisphere.
While this is hardly a revelation for most Australians, the fact that this isolation stretches well beyond the realm of geography has been a frequent emotional issue for Western Australians. The prevailing view is that WA has been the standout economic performer for the country over the last decade, but the benefits of such strength have often been diverted – some would say to WA’s detriment – back to the East Coast.
What else can explain WA premier Colin Barnett’s plea for a lift in the Goods and Services Tax (GST) rate? Barnett made headlines in September for telling the government to “man up”, saying that something needed to be done about long-standing imbalances among states. His logic was that Australians wouldn’t mind too much if the GST rate were raised in an effort to maintain a high quality of services.
While some have agreed that a review of the GST rate would be timely, others have criticised his recommendation, saying a lift in GST would be disastrous for a number of sectors – including property.
Ken Raiss, director of national accounting firm Chan & Naylor, says that in reviewing the GST rate, both the federal and state governments must contemplate the state taxes and duties that the GST was originally set up to replace.
“We need to review the GST and how it is allocated, which does not mean increasing the rate or the base of the tax,” Raiss says.
Raiss adds that what the Treasury should really be considering is its approach regarding taxes he believes are “regressive”.
These include stamp duty and land tax, both significant government charges made on property purchases, which Reiss claims to be disincentives to commercial activity and economic growth.
“Australia requires stable and sensible regulations for SMSFs, labour, banking and tax,” Raiss says.
“It is this combination that will grow confidence to generate spending, business cash flows and employment.” Real Estate
Institute of Australia president Peter Bushby is also of the view that stamp duty should be abolished or reviewed, arguing that the tax inflames long-standing imbalances among states.
“Stamp duties on property transfers are not only inefficient; they are costly to manage, reduce national competitiveness and productivity and are unequally and unfairly applied,” he says.
He adds that property taxes set by all three tiers of government have an impact on housing affordability, and that stamp duties, land taxes, risk premiums and finance charges push up the cost of new housing and restrict supply.
“The average tax burden on the new housing sector is estimated at around 31% of the value of output. It’s estimated that the removal of some inefficient taxes could reduce the cost of housing by around 10%.”
WA population
Growth leads nation Six out of the top 10 fastest-growing council regions around the country are located across WA, and three are in the Perth metro area.
This is according to RP Data figures, which also show that the Perth council region’s population growth rate of 125% over the 10 years to June 2012 was the fastest in the country over that period, pushing the current population to approximately 19,000 residents.
Other Perth metro councils recording top 10 growth included Wanneroo and the Shire of Serpentine-Jarrahdale.
WA’s – and the country’s – second fastest-growing council region was East Pilbara. Here the population rose from 5,909 in 2002 to 12,581 in 2012, a growth rate of 112.9%.
Over the 2011/12 financial year, population growth in the Perth council remained high at 3.7%, but was outpaced by councils such as Armidale (5.9%), Kwinana (6.6%) and Wanneroo (5.6%). Growth in the East Pilbara council was only 2.6%.
Spotlight on: Five-year growth in Perth CBD
As the Perth CBD has grown, it has spilled into surrounding areas, of which West Perth has arguably been the biggest beneficiary. It has grown in density over the last decade, with an increasing number of commercial buildings and high-rise apartments. As a result, 2013 unit values are up 10% on 2008, and house values are 23% higher.
On the opposite side of the CBD, spillover growth into East Perth has been going on much longer, evidenced by higher pricing. Coupled with closer proximity to the Swan River, this has meant East Perth house values are almost $300,000 higher than West Perth’s.
Surprisingly, unit prices in the centre of the CBD have hardly moved since 2008. This suggests that, although commercial activity has grown, it either has failed to filter into house prices or, more likely, the market has been patchy over the last five years, growing at times, before sinking again and levelling out at much the same point as before.
Suburb To Watch
Maylands
Harcourts’ John Caputo explains how recent changes have improved Maylands as an investment destination.
Selling points: Maylands has its own train station and is surrounded by the picturesque Swan River. An abundance of parks line the river banks, all with good city views. The suburb is 6km from the Perth CBD, but has a decent local cafe strip for residents in search of entertainment within the area – supplemented by a $21m multipurpose centre on Eighth Avenue. Such amenities add up to good future prospects for capital gains.
Types of properties: Most are villas or townhouses, but the most sought after are units and townhouses.
Local industry and business: A wide range of service providers operate in the suburb. Maylands is home to cafes, a yacht club and boatyard, a water park, gym and chemist. There are also plenty of major fast-food chains, along with a Coles and a medical centre.
Recent changes: Zoning changes have allowed several new cafes to be established. The multi-purpose centre on Eighth Avenue, recently built, has also seen $21m worth of investment flow into the area. A centre for the blind on Whatley Crescent has been completed.
Public transport: This includes Maylands Train Station and plenty of bus stops. The main arteries through the area are Guildford Road and Whatley Crescent.
