Property tax reform
The states are asking the Australian federal government to adopt a new property tax system offering flexibility to home buyers. A buyer would be given the choice it either pay stamp duty upfront or annual instalments in the form of land tax. This would provide buyers with a 4% reduction in upfront costs, increasing home ownership by 6%.
Long term, the economy could grow by an extra $10 billion and households would be $3300 richer and able to get into the housing market 2.5 years earlier.
The proposal could be a hard sell as the Federal government would initially lose billions of dollars in upfront stamp duty, but the generated economic growth would lead to increased income taxes and land taxes benefiting the government long term.
The proposal would also make downsizing at retirement age a more attractive option without the upfront burden of stamp duty on a new dwelling.
The ACT began phasing out stamp duty in 2012, but Victoria has plans to increase stamp duty. A national scheme swapping stamp duty for land tax just makes sense long term.
Private industry firmly backs the change including REIWA who ‘firmly believes that the single biggest hurdle for prospective homeowners in Western Australia entering the property market is the financial barrier of stamp duty’. Their public survey pointed to a 90% support rate with potential home buyers seeing stamp duty as a significant barrier to entering the market.