Stamp duty ‘knee-jerk’ reaction from government

by 13 Dec 2013
Property taxes are a “knee-jerk” reaction from government which serve to put the brakes on the property market while filling government coffers, says a real estate industry leader.

John Cunningham, deputy chairman of the Real Estate Institute of NSW says the group is currently looking to commission research into different options for minimising stamp duties, such as a national exemption for over 65s with regards to stamp duty, and what other options exist for raising capital.

“So we're looking at both ends, the first home buyer and the last home seller... You can see the state government coffers have been filled very eagerly in the last few months with the real estate boom that’s happening at the moment, but first home buyers are the ones that are not in the market place, they’re the ones that are being pushed out of the marketplace by investors."

A lack of concessions for first home buyers and overzealous taxation on property have stifled activity in the market, and its high time for reform, says Cunningham.

“State government tend to have a bit of a knee-jerk reaction to stamp duty and they don’t have a consistency across the board with reform, they just tend to go with what’s fashionable or popular at the time to stimulate that section of the market rather than having something consistent.”

While some states have had success with lowering stamp duty, a switch towards land tax is not the answer, says Cunningham.

“Land tax is a heinous tax, the biggest disincentive to property investment imaginable. The answer is to increase GST, but you may as well throw that one out. It’s the consumer tax whereas all the others are investment taxes… it’s a very odd set of circumstances.

“When governments look at raising money they automatically look at the property industry and taxing it more as the answer, the quickest, easiest way.”

By lobbying for real reform in the property industry, there is much to be gained for both consumers and industry professionals, says Cunningham.

“We know there are roadblocks that occur at both ends, and from that point of view it’s worthy of investigation for both brokers and agents. It’s an industry that we share and stimulating more activity means everyone benefits; people move more when they need to rather than when they’re forced to. There are a lot of positive social outcomes from it and a lot of positive financial outcomes for all.”

COMMENTS

  • by Karl Fitzgerald 13/12/2013 10:47:53 AM

    re "Land tax is a heinous tax, the biggest disincentive to property investment imaginable."

    Last time i looked, no matter how much 'investment' is made in property, it can't increase the supply of land. There is no other industry on earth where you can buy land and wait, earning thousands in your sleep, whilst others do all the work for you, improving the local community, building better infrastructure.

    Land Tax recycles a pittance of the natural increase in residential land values we saw in 11-12 of $191bn. This increase was $37bn higher than the year before.

    And yet these same people cry poor over lack of infrastructure. Many in the property lobby understand that such value capture is the best way toward financing a fairer society.

    John Cunningham should read the Henry Tax Review to understand why Land Tax is the most efficient tax. John is advocating higher taxes on my productive work whilst he gets to buy and sell paying very little. Hopefully Cunningham will agree in time that a flatter, fairer Land Tax should be established to replace developer levies, so that costs are spread over the lifetime of the asset, not hitting just one generation.

  • by Beneath the surface 13/12/2013 11:04:43 AM

    Can always count on the REI to play the same dodgy tune:

    * Booming real estate industry - but blame the gov't, blame the taxes!

    (Most wealth in Australia has been made in property DESPITE the taxes)

    * "commission research into different options for minimising stamp duties". Christalive, at least they're declaring the planned outcome of their 'research'

    * filling state gov't coffers? Hint: no state gov't coffer is anywhere near full.

    Few people want a higher GST just so property flippers can pay less stamp duty.

  • by Beneath the surface 13/12/2013 12:16:30 PM

    Can always count on the REI to play the same dodgy tune:

    * Booming real estate industry - but blame the gov't, blame the taxes!

    (Most wealth in Australia has been made in property DESPITE the taxes)

    * "commission research into different options for minimising stamp duties". Christalive, at least they're declaring the planned outcome of their 'research'

    * filling state gov't coffers? Hint: no state gov't coffer is anywhere near full.

    Few people want a higher GST just so property flippers can pay less stamp duty.