One of the biggest cost considerations when purchasing commercial real estate in Surfers Paradise is tax. While it might seem like the first step is done and dusted once you've laid down a deposit, there are typically a wide range of levies you need to pay throughout the process. As the owner of commercial property in Surfers Paradise, you will need to pay charges on the overall purchase price, which are known as stamp duties, right through to taxes at the time of sale.
However, the Federal Government has placed tax reform firmly on the agenda with the release of its Tax Discussion Paper. This could have some interesting implications for commercial property investors in Surfers Paradise. These developments could spell some dramatic changes for the tax system all throughout Australia, so if you're thinking about making southeast Queensland your top choice for commercial property investment, it's worth staying on top of what happens in this area.
The latest announcement came swiftly off the back of the the 2015 Intergenerational Report, which highlighted some of the most significant changes that the economy will face over the next 30 years or so. Top of this agenda was a surging population base and rapidly shifting demographics. However, Mr Hockey said Australia's current tax system isn't quite in the right place to meet these changing needs.
"The Government must build a tax system that delivers taxes that are lower, simpler and fairer," Mr Hockey said in a 30 March release.
The discussion paper outlines that stamp levies are one of the biggest constraints on economic growth, a point that has been echoed by the housing and construction industry nationwide. State and territory governments collect around 15 per cent of their revenue from taxes in 2012-13, the majority of which is from payroll and property taxes like stamp duty. In fact, property taxes accounted for about 9 per cent of Australia's total tax revenue in 2012 – streets ahead of the OECD average of 5 per cent.
The report also points out that conveyancing stamp duties have a big toll on property sales, because they can often discourage owners from exchanging both residential and commercial property. Commercial property investors can often bare the brunt of stamp duty with generally higher levels than their residential counterparts, so any reduction would likely be a welcome relief.
Property commentators have welcomed the renewed discussion with open arms. Master Builders of Australia said this conversation has come in the nick of time, particularly for the construction industry. Given that building work is playing such an important role in southeast Queensland's development, this tax reform could be crucial seachange for the commercial property market in Surfers Paradise.
"As the Intergenerational Report highlighted, Australia needs a tax system that can support improvements in economic growth, productivity and workforce participation as well helping to underpin solutions to crucial social policy issues such as housing affordability," CEO Wilhelm Harnisch said in a 30 March release.
"Construction businesses want to see a reduction in the corporate tax rate which is too high and inhibits investment, particularly in the global economic context where competition for investment will only intensify."
The discussion paper encourages all Australians to participate in the reform process, with submissions closing 1 June 2015. These responses will provide the backbone for the government's tax options Green Paper to be released later this year, with policy proposals coming light in 2016.
While the changes are a fair way off yet, it's a step in the right direction and a positive sign for the commercial property market. It's still worth having a chat with your property manager or local commercial real estate professional about how tax reform could impact your commercial property portfolio.