Raising GST not the only answer to binning stamp duty

by Julia Corderoy15 Jul 2015
A new paper argues that raising the GST is not the only answer to abolishing stamp duty, which is widely known as Australia’s most inefficient tax.

According to a working paper by independent think tank, Grattan Institute, a broad-based property levy could raise $7 billion a year and could fund the abolition of stamp duty.

Property Taxes, the second in a series of Grattan working papers on tackling Australia’s weakening fiscal position, finds that a levy of just $2 for every $1,000 of unimproved land value would raise $7 billion a year with an annual charge of $772 on the median-priced Sydney home, $560 on the median-priced Melbourne home, and lower average rates in other cities and the regions.

Grattan’s recent working paper, Fiscal challenges for Australia, found that state budgets are under pressure, with spending in health, education and other areas growing faster than GDP. State revenues are also threatened by the Commonwealth’s decision in last year’s budget to substantially reduce promised funding to the states for hospitals and schools.

“Attention is focussed right now on the worsening Commonwealth deficit, but states and territories have a looming funding gap, and have provided little insight into how they are going to fill it,” Grattan CEO John Daley said.

Property Taxes argues that a broad-based property levy calculated from the council rates base would be the best revenue measure to fill that gap.

“While property taxes can be unpopular because they are highly visible and hard to avoid, they are also efficient and fair, and don’t change incentives to work, save and invest,” Daley said.

“Unlike capital, property is immobile – it cannot shift offshore to avoid taxes. Over the last 25 years, taxes on property and property transactions have been the only significant ‘growth taxes’ for States, with revenues keeping pace with the economy.”

Unlike stamp duty however, Daley says the proposal is manageable for property landowners, and protects low-income people. 

“Low-income retirees with high-value houses could defer paying the levy until their house is sold,” he said.

The working paper argues that the levy could also be used to fund the reduction and eventual abolition of stamp duties, among the most inefficient and inequitable state taxes.

According to Daley, shifting from stamp duty to a property levy would provide more stable revenues for states and add up to $9 billion in annual GDP.


  • by SEQ Broker 15/07/2015 10:07:51 AM

    Great, So we will end up with Stamp Duty still in place, quarterly rates bills (here in QLD) which are some of the highest in the developed world (My $280K investment property has $3600 per annum rates inc Water - my partners investment in Blacktown Sydney just over half that) and on top of that another tax bill. Stamp duty is high I agree. But only 2nd home buyers pay it (QLD) or First home buyers who are wealthy enough to buy property over $650K ish i.e. People who can afford it. No one likes the stamp duty but why transfer this tax from people getting a benefit from paying it to people who won't.

  • by BJ 15/07/2015 11:37:17 AM

    1. Investment decisions based on a taxation outcome is a fundamentally flawed strategy.
    2. If that investment does not stand the test i.e. real return net of costs, tax, inflation and risk reward, don’t invest.
    3. If you are paying tax there is a reasonable chance you’re making money.

    Now, SEQ Broker, as for “some of the highest in the developed world”. Some options open to you are to invest elsewhere, (alternate jurisdictions) potentially lower costs, offset against exchange controls, exchange risk (cost of hedging if you are that sophisticated) and all the legal and often complex, disastrous outcomes and the inevitable appalling service level, for which rates and taxes are paid.
    As I posted yesterday and I will say it again,
    What would give some balance, is a survey of those renting and unable to accumulate a deposit (those without a voice). One would expect a very different result/findings e.g. Why should those unable, as a result of lower wages, employment, subsidise those of us with the ability (good fortune or otherwise) to purchase and invest in property.
    These grandstanding statements “the majority of Australians” is quite frankly insulting to those thinking, independent Australians without a barrow to push.
    I am convinced, that most professional advisers would read any report “commissioned by The Property Council of Australia” with the level of scepticism it rightly deserves.
    Continue to preach limited views on taxation reform from that shallow grave and focus that narrow argument on the removal or amendment to stamp duty. True taxation reform will undoubtedly come as a result of a broad review, which will impact on all working Australians and dare one say “we will all wear the pain”, some unfortunately more than others.

  • by SEQ Broker 15/07/2015 12:15:40 PM

    Reasonable Point BJ. I agree with your investment advice. However why should those poorer people support us wealthier people is a flawed argument. I lived in a shed for a time to support my investment. Wealthy people have often taken risks, worked harder, had a go and have spent dollars educating themselves and IMO deserve a fiscal reward for their efforts. How many poor people make a choice not to go for it, not to commit, not to try, not to educate themselves...in a country where there are free options for most of this. I myself was the beneficiary of some free education courtesy of the govt, when I became unemployed during a previous career. I now have a diploma and use it to make a modest income - I had a go. Why should poor people pay rent to a wealthy (er) person, because they choose to!