In the spirit of following on from my fellow columnist and soon-to-be-retired friend, Mark Douglas’ missive on pay-roll tax last week, stamp duty is in my sights. Watching some benign morning television recently, the host was hammering away at the federal Housing Minister, Clare O’Neil about stamp duty and the impediment of this tax on housing supply and affordability. The Minster, as do countless economists, agreed that stamp duty was a ‘bad tax’, but reforming it was up to the states and territories – a nice bit of passing the buck.
State and territory governments are drunk on stamp duty revenue. Collated with other property related taxes, revenue raised equates to about a third of their income. Without stamp duty, the money needs to come from elsewhere.
One good idea is to enable buyers paying the tax to choose to pay it upfront or – a bit like a HELP / HECS debt – pay it off over a period of time at a low rate of interest. If the property is sold, the debt is paid from the proceeds or in rare negative equity situations, it remains with the buyers as a tax debt to manage over time. Governments would miss the sugar-hit of stamp duty income, but it would smooth out revenue over time, enabling more accurate budgeting.
Other ideas include expanding land taxes to include the family home, so all property owners contribute to state coffers rather than just buyers of real estate. The problem here is the adverse impact on home asset rich, income poor citizens – think pensioners in homes they’ve lived in for 40 + years. (The changes to superannuation with balances over $3m demonstrates government doesn’t care much for this group anyway).
Without doubt, stamp duty adds to the cost of rents and adversely impacts housing affordability. It is a huge impediment for first home buyers having to save an additional $27,265 if purchasing a $700,000 property. Given we know the lack of housing supply contributes to rising property values and rents, moving tenants into home ownership frees up rental supply putting downward pressure on rents.
Sadly, there is very little appetite from decision makers for meaningful stamp duty reform. The feds point to the states, and the states shrug and simply demand the revenue in lieu from the Commonwealth. The bracket creep of market growth conflict governments to their core; they want affordable housing but as property values rise, so does their stamp duty take.
by HAYDEN GROVES
REIA President 2021-2023
REIWA President 2015-2018
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These comments are the author’s own and may not reflect the opinions or policies of the Real Estate Institute of Western Australia/Australia.