Scaling back stamp duty in Western Australia is long overdue, according to Kelly Jones, Director of Jones and Co.
“Stamp duty is an inefficient tax that’s reviled by industry and consumers ,” Kelly said. “It’s by far the worst of the taxes that homeowners are hit with and it’s time it was replaced by a fairer, broader-based land tax.
“It is vital that the State Government and Opposition go to the March election with a plan to set the State up for stronger long-term growth and this must include stamp duty reform.”
Kelly said that because the duty was calculated on the purchase price, there was a huge imbalance caused by the increase in house prices over the last three decades.
Currently if you buy a property for $500,000 the duty is nearly $18,000. If the house is $1,000,000 then you’ll pay more than $42,600 in stamp duty. The median house price in Perth in 1995 was $120,000, on which you’d pay about $2600 in stamp duty. Three decades later in 2015 when the median house price was $530,00 you’d pay $19,190 in stamp duty. That’s a 738% increase* in stamp duty on a median house price increase of only 442% (*Property Council of Australia).
The costly and hugely prohibitive tax means West Australians are staying longer in their current homes.
“This has a variety of implications for our communities and neighbourhoods,” Kelly said. “It means family homes are not being released onto the market by people who traditionally were in the mindset to downsize. They don’t want to use up such a big chunk of their retirement nest egg on stamp duty so they end up staying put.”
And it’s become the norm for younger buyers to borrow the money to pay their stamp duty, adding thousands of dollars and years to their mortgage, she added.
REIWA President Damian Collins agreed it was time the West Australian government started serious discussions to remove stamp duty.
“According to Deloitte, removal of stamp duty could lead to a 60 per cent uplift in transactions, generating an additional $1 billion to the WA economy, which is why a tax switch would establish the right settings for long-term growth,” Mr Collins said. “By introducing a broad-based tax system, payments will be made over a longer period, allowing those who need to move, the ability to do so.
“Having an opt-in model only on new transactions will mean that those who have paid stamp duty are not unduly hit by the replacement tax.”
Reserve Bank Governor Philip Lowe believes there is an opportunity post-coronavirus to push forward with stamp duty reforms.
He said the first of these economic reforms should be “the way we tax income generation, consumption and land”.
AMP Capital Chief Economist Shane Oliver said stamp duty was a massive impost on a single transaction which inhibited economic decision-making.
“It was a terrible tax. It should be repealed and this is the perfect time to do it,” Dr Oliver said.
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