Another interesting article by the Real Estate Institute of Australia research officer Evgeniya Hawthorne.
The housing sector in Australia contributes nearly $40 billion in taxation revenue to federal, state and local governments each year, or 11% of the total taxation revenue collected. Despite the fact that stamp duty is widely acknowledged as an inefficient tax, little has been done to ease the pressure from those buying property.
Stamp duty is the tax imposed by state governments on certain contracts, with the amount of tax payable calculated as a percentage of the contract value.
Australia has a long history of inconsistency and complexity in this area with states and territories applying different stamp duty rates and offering different concessions depending on the characteristics of the buyer and the property.
• In NSW, from 1 January 2012, stamp duty concessions are no longer available to first home buyers of established homes.
• The Victorian Government offers eligible first home buyers a duty reduction when they purchase a new or established home. Currently,the reduction is 40% and it will eventually reach 50%, when it has been completely phased in.
• In Queensland, stamp duty concessions are available to eligible first home buyers of both new and established homes.
• While first home buyers in Tasmania no longer enjoy the $4,000 concession, the initiative was in place between 20 May 2004 and 17 June 2011.
• In Western Australia, the $250,000 first home buyer stamp duty relief was increased to $500,000 on 1 July 2007.
• In the ACT, the stamp duty concession ceased for first home buyers of established homes as of 1 September 2012. Eligible first home buyers can elect to defer payment of the duty.
For the governments of states and territories, stamp duties are the major source of budget revenue. Table 1 shows revenue from stamp duties on conveyances collected by state and territory governments between 2002/03 and 2011/12.
The Real Estate Institute of Australia (REIA) has been advocating for stamp duties to be abolished. REIA’s biggest concern is the damage stamp duties do to housing affordability and labour mobility.
Stamp duties represent additional costs to property transactions, thereby discouraging turnover of housing and distorting choices between renting and buying and between moving house and renovating. Individuals who move more frequently would pay more taxes than those who move less often. Others, who would have to buy or sell if they changed jobs, could be deterred by these costs, thus reducing labour mobility. These distortions lead to sub-optimal outcomes, reduce investment in the property market and impede labour mobility.
Stamp duties should be abolished and replaced by an efficient source of revenue for states and territories.
This article is brought to you by REIA Research Officer, Evgeniya Hawthorne.
Evgeniya can be contacted at email@example.com