‘Imputed rent’ tax unwelcome
Homeowners should be concerned about a proposal that their major asset be taxed on the basis of its potential rental value.
A report by two leading economists has suggested a radical overhaul of the tax system, targeting the family home.
Professors Peter Siminski, from UTS Sydney, and Roger Wilkins, from the University of Melbourne, have raised the concept of “imputed rent” — the financial benefit owner‑occupiers enjoy by living in their own homes rent‑free.
As the Australian Bureau of Statistics puts it, “Including imputed rent as part of household income and expenditure conceptually treats owner-occupiers as if they were renting their home from themselves, thus simultaneously incurring rental expenditure and earning rental income.
“Imputed rent is included in income on a net basis i.e. the imputed value of the services received less the value of the housing costs incurred by the household in their role as a landlord.”
The researchers claim homeowners’ disposable income is much higher than that of renters and argue that our tax system compounds this inequality because homeownership-related income is not taxed.
Unlike other forms of investment, owner‑occupied housing is exempt from capital gains or imputed rent taxation, which is said to cost the country about $50 billion in forgone revenue each year.
The researchers argue that this tax treatment not only rewards existing owners, but also inflates housing demand and prices, further sidelining first‑time buyers and widening wealth disparity.
“The tax‑free privilege homeowners are afforded is really quite extraordinary,” Siminski told ABC News. He described owner‑occupied housing as “the elephant in the room” in debates over tax reform and inequality.
History buffs might know that Australia has been down this track before. Imputed rent was part of the tax base from 1915 to 1923, and its reintroduction was proposed but rejected in 1975.
According to this report, only four OECD countries (Denmark, Greece, the Netherlands, and Switzerland) tax imputed rents, but they do so at comparatively low rates and only under certain conditions.
National Seniors Australia (NSA) opposes any attempt to introduce an imputed-rent tax or to view home ownership as a “privilege”.
Such an impost would severely impact those who have worked and saved all their lives to purchase their family home, often at great risk and sacrifice.
It can be seen as a punitive tax on hypothetical income, placing an unfair burden on people, including many seniors, who own a valuable property but receive a limited income.
There is evidence that such a tax would soften the property market, reducing the value of many senior Australians’ major asset.
NSA CEO, Chris Grice, said the family home should remain off limits.
“We would oppose anything that has an impact on taxing the family home,” he said. “That includes counting the value of the family home in the Age Pension means test – an idea that refuses to die as we all know it should.
“Most people live in modest homes that they have spent a lifetime working hard to pay off so they can have security in later life. As Daryl Kerrigan says: It’s not a house. It’s a home!”
Related reading: ABC, ABC 2, The Conversation
