With the treasury expected to collect about $3.8 billion from stamp duty this year, nation-wide home buyers are in agreement on the call to streamline the greatly disputed tax. State based stamp duties are widely recognised as a drain on our nation’s productivity and inefficient and unstable source of revenue for each state.
Currently, home buyers are perplexed by the lack of uniformity in stamp duty rates across the country. On a $400,000 home, first home buyers in Victoria, South Australia and Tasmania are forking out over $12,000 in charges whilst those in New South Wales, Queensland, Western Australia and the Northern Territory pay nothing at all. First home buyers in the $700k+ bracket pay as little as $8,130 in NT compared to a hefty $34,860 charge for a standard purchase in NT. On the extreme end of the scale Victorian’s are forking out $41,530 for a property in this price range.
To further complicate matters, Australia wide we are seeing state governments pull back their concessions for first home buyers. In Queensland, the government has just recently cut its $10,000 first home buyers boost, the Northern Territory is ended its $10,000 grant on new properties on New Year’s Eve last year, and South Australia is completely revoking its discount for buyers of established homes mid 2012.
Evidently, state governments are using the tax as a lever to adjust revenue levels. In late October 2011 the government cut back stamp duty payment deadlines from 90 to 30 days after settlement in a bid to bring forward revenue and help meet budget surplus targets for the year.
Further to this, given the level of activity in the housing sector has declined, removing concessions for First Home Buyers is also likely to be an attempt to claw back revenue. If this is the case, it highlights the states dependence on a volatile and uncertain revenue base.
Stamp duty creates a barrier for those wanting to buy or sell property in a number of ways. The inconsistency of the tax across the country discriminates against those who move where the jobs are. It also discourages those who need to downsize, predominantly the elderly which in turn affects First Home Buyers looking to enter the market.
In the short term it is clear that the tax cannot simply be removed. However, in the interim, a range of reforms to make the current regime fairer could be introduced, including: the removal of GST on stamp duty (tax on tax) in non-residential transactions; limiting higher stamp duty rates for investors; and, most importantly, the indexation of duty rates so the proportion of tax paid does not increase.
We at the REIA are calling for the removal of state based property taxes and have been actively lobbying to key government bodies for increased harmonization of the tax across the nation. As a result of our presentation at the 2011 October tax forum, Queensland and New South Wales governments have agreed to examine the harmonisation of payroll tax and possibly other taxes (stamp duty) and present a state tax reform plan to the Federal Government by the end of 2012.