Revenue 'gushing' into Treasury coffers: Time to stamp out stamp duty?

by Mackenzie McCarty20 Nov 2013

Stamp duty taxes need to be eliminated – and first home buyer grants do little to bandage the wound, according to some industry spokespeople.

A recent opinion piece by Robert Carling in the Australian Financial Review claims state governments enjoy real estate booms because rising prices and turnover combine to send stamp duty revenue ‘gushing’ into the Treasury coffers.

“But the states’ reliance on this source of revenue is unhealthy and highlights the need to rethink how states are funded,” says Carling.

Tasmanian Smartline broker, Richard Denholm, largely agrees, saying stamp duty is ‘nefarious’ for first home buyers.

“For the first home buyer, it’s a big barrier because normally they have LMI as well.”

His state government has recently increased its first home builder (FHB) grant to $30,000, something which Denholm believes will help alleviate some of the financial pressure on first home buyers, but says there are also likely to be some unwanted side-effects.

“I think for what the [Tasmanian] government’s trying to do, which is stimulating things, the grant will do that. It will cover the stamp duty and LMI; for some people it might eliminate stamp duty…There is quite a bit of stock on the market, so long-term it might have an effect by pushing up prices.”

Furthermore, he says, the FHB grant is only for purchases of newly completed properties, or for buyers that are planning to construct.

“An unintended consequence could be that properties in the bottom of the market - there could be a lack of movement there.”

However, Rate Detective Finance broker, Warren Dworcan, says policy makers would need to devise other ways of earning revenue before abolishing the stamp duty system entirely.

“It would be nice in that it would increase property activity, although state governments would need to find alternative ways to supplement the stamp duty revenue, which may cut into vital services so I’m not sure it would be viable.”

Dworcan also says the negative effects that stamp duty can have on first home buyer figures in particular varies from state to state.

“The various governments may lower it to increase activity or raise it to put more money into different areas so it affects people in many ways…It’s a lucrative way for state governments to bring in revenue to spend on their economy for progress. However, it’s a hefty cost for people buying a property.”

COMMENTS

  • by Campbell Simpson 20/11/2013 8:59:16 AM

    What would replace stamp duty revenue? Maybe a better idea is for Canberra to phase out tax concessions - negative gearing losses could be quatantined so they get carried forward until the investment starts making taxable income. That would put downward pressure on prices, helping FHB, but add to Government revenue.
    Tasmania expects their health costs to match every cent of revenue they get by 2025, Qld by 2030 and NSW by 2032, so states need money from somewhere (or maybe just cut out this middle tier of Government). Thye OECD predicts federal debt to hit 70% of GDP due to the ageing population so they can't easily fund tax cuts either.

  • by Scott Beattie 20/11/2013 9:42:59 AM

    "What would replace stamp duty revenue?"
    I have an idea, we could introduce a tax, let's call it GST as an example which would replace all other taxes and there would be no need to have things like stamp duty and the like...

  • by DanG 20/11/2013 9:46:20 AM

    Perhaps stamp duty should be paid only by a vendor, percentage based on how much the property has increased since they purchased it

    New buyers will get into property easier, and, when you sell you should be able to afford the stamp duty with equity built in the property. If not, you pay a cost that you would have anyway but had more time to prepare for.