Could our government give up its stamp duty addiction?!
Recently our NSW cousins stirred the property tax pot with plans to phase out stamp duty in that state. While some of us remember promises made with GST’s introduction in 2000, word of last month’s NSW budget is the first time we’ve been hopeful enough to seriously wonder, could stamp duty soon be scrapped here?
Buy a median-priced Brisbane home right now and $9,275 of your savings will go to your friends in George St; make that purchase as an investment and it’ll be $16,450. In the NSW model they’ve proposed home buyers make a choice: pay your duty up front or make it an annual land tax. If it’s the latter, that decision remains with the property for its future owners.
In 2010 Ken Henry’s national tax review caused plenty of discussion when he suggested land tax was more efficient than stamp duty, and over the years there’s been on and off rumblings on the topic. But until last month the ACT had been the only government to make a change. No-one seems to agree on when we’d like our property tax payable!
The Property Council says stamp duty is “evil”. ““It distorts activity, reduces transactions, traps people in inappropriate housing, reduces labour mobility and makes housing construction more expensive. It does everything a tax shouldn’t do.” We wouldn’t be Robinson Crusoe in scrapping it. Says the Grattan Institute: “In New Zealand there is no stamp duty; in the UK stamp duty does exist but it does tend to have lower rates than in Australia; and in the US you do have some stamp duty in some states but you tend to rely on more broad-based property taxes.”
So what of our Queensland government’s reliance on stamp duty? Take a look at this tidy pie chart from last week’s budget papers: transfer (stamp) duty gives our government almost 20% of its revenue. It raised $3.041 billion last financial year!
The budget papers show the COVID kick to property turnover saw this drop 5% from 2019 however, and for this financial year the state’s bean counters say they’ll collect less than $2.7billion (down 11% on 2020). Meanwhile land taxes roll on relatively unchanged.
Reading on through the budget papers (the things we do for you!) I noted this comment: “Transfer duty can be relatively variable, reflecting residential and nonresidential market conditions. Land tax can also reflect variability in the property market, however any volatility in land tax collections is moderated substantially by the relatively stable base and the effect on assessments from three-year averaging of land values.”
Clearly there’s some support for a change to a smoother, predictable annual land tax. If you’re a Queensland Treasurer trying to plan your spending, the zig-zagging estimates on 20% of your revenue must cause headaches. But is it a big enough headache to move to a model like NSW?
And one final question. Why should property owners pay a tax, yet owners of shares and other assets do not? Don’t we want Australians to own real estate?!
Please share your comments: Do you think NSW is onto something? Or should we stick with the “evil” we know?!