Landlords pay almost $7 billion a year more in tax than home owners, pushing rents higher

This reflects the negative gearing issue that the Senate report raised concerns about.

However, landlords also paid other taxes over the decade – and that’s where the biggest difference with owner-occupiers emerged.

An extra $69 billion over a decade

From 2013–13 to 2022–23, I found landlords paid an average of $3.7 billion a year in capital gains tax, even after the 50% discount allowed for capital gains.

They also paid around $3.6 billion in state government land tax, which I was able to estimate by obtaining unpublished Australian Bureau of Statistics land tax data.

Allowing for all three taxes, landlords paid a total of $6.9 billion in a typical year from 2013–14 to 2022–23, as shown in the table above.

While owner-occupiers do pay some other taxes, such as the goods and services tax on new housing and local government rates, landlords pay those other taxes as well.

So the bottom line is that landlords have paid an extra $69 billion in taxes over the past decade, which owner-occupiers didn’t have to pay.

Renters end up paying higher rents

Do landlords pass that extra tax burden through to renters? The authoritative 2010 Henry Tax Review concluded it was likely they do:

Since owner-occupied housing is exempt, land tax on residential investment properties is probably passed through to renters as higher rents.

While the Henry Review was specifically referring to land tax, the same economic logic applies to the other extra taxes on rented housing.

We can see how significant this extra tax burden is by comparing the annual amount of extra tax – around $6.9 billion a year – to the 10-year average for the value of actual rents, $47.9 billion.

If those costs were being passed on in full, that would mean around 14% of housing rents in the past decade would have been due to taxes that apply to rented housing, but not to owner-occupied housing.