Disclaimer: This information is intended to be of a general nature. Please do not rely on any of the content as being a professional tax or legal opinion and seek your own independent advice.
In recent state and federal elections, many of the policies of the two main opposing parties have not been that different. Not so this time around as West Australians prepare to cast their votes on 11th March.
Property related taxes have long been the “revenue play-thing” of successive state governments with (once GST revenue is excluded) these taxes contributing about a third of all state income. It is therefore an important income stream for governments responsible in the delivery of essential services.
The problem with property taxes is they rise and fall in line with the free market; less sales transactions equals less transfer duty, less investment equals less land tax. With sales transactions less than half that of a decade ago transfer duty income has also halved given property prices have barely changed over the same period. Property investment is also very soft and aggregation rules around land tax coupled with a 35% rise in this tax over the past three years hardly encourages more investment.
Property taxes need to be arranged in a manner that encourages mobility in the property market. The Barnett government’s announcement this week to give seniors (those aged over 65) a transfer duty exemption of up to $15,000 for those “right-sizing” their homes is intelligent policy. A substantial blockage in the current arrangement is the high cost of transfer duty for those seniors who are “asset rich and income poor”. Few feel encouraged to move to more appropriate accommodation when the transfer duty burden represents a full years’ pension at a purchase price of $750,000. The policy will bring to market family homes on larger lots more suited to family groups at higher values bringing the government more transfer duty than that lost to the exemption: a win-win policy.
Disappointingly, Labor’s plan around property taxes in to introduce an extra tax of 4% to foreign property buyers. The justification for this is that “the east coast does it.” This is lazy, ill-conceived policy that ignores the current state of the Perth property market. The foreign buyer surcharges in the east is in response to red-hot speculative markets in those states and therefore a necessary move to slow those markets. In Perth, this will stifle already weak growth and affect jobs in the construction sector partly reliant on pre-sale commitments from foreign buyers.
REIWA is committed to an apolitical approach to property matters and will back the side that develop policies that support home ownership, addresses affordability and encourages housing diversity. If property matters to you, picking a side this election should be easy.
By Hayden Groves
REIA Deputy President