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As affordability and tight lending standards have continued to bog down the property market, stamp duty was amended to various degrees across the states at the turn of the financial year, with a particular emphasis on supporting first time homebuyers.
However, as stamp tax is the second largest source of state government revenue, the changes were minimal, leaving some to question the scale and effectiveness of the provisions, as well as the structure of the stamp duty system as a whole.
Impact on state budgets
According to HIA chief economist Tim Reardon, Australia would be well-served to consider replacing the stamp duty system altogether, opting instead for a more “predictable and equitable tax.”
Reardon explained, “Stamp duty is an unreliable source of revenue and the increased dependence makes states heavily susceptible to housing market downturns.”
In fact, the recent property market stagnation has cost New South Wales an estimated $10.6bn in stamp duty revenue. The figure sits at $5.2bn in Victoria.
Stamp duty contributed more than 20% of all taxation revenue raised in New South Wales, Victoria, Queensland and Tasmania in 2018-19.
Conversely, the ACT has the lowest dependence on stamp duty, with it contributing just 13% of total tax revenue.
The ACT model
The ACT is in the midst of a 20-year tax reform program, with stamp duty decreasing each year until it is completely phased out by 2022.
From 1 July 2019, first home buyers with a combined household income below $160,000 no longer pay stamp duty on newly built or established homes. Additionally, stamp duty fell a further $1,000 to around $23,700 for the median house price.
Gerard Heffernan, director and finance broker at Canberra-based Heffernan Lending Solutions, believes that the state’s stamp duty reform will help the market, but doesn’t expect to see immediate results.
While the eradication of stamp duty in the ACT is intended to remove one of the main barriers to homeownership, Heffernan emphasised that the cost for consumers is still there, just further down the road.
“Stamp duty is being replaced by the government raising rates to compensate. For the established market, that means they’re paying twice. They paid their stamp tax, and now they’re paying it again,” he said.
"Also, the ACT model wouldn't work in states of other sizes," he noted.
First home buyers
The ACT is the only region in which stamp duty is directly stimulating the housing market, according to Scott Durrant, director and founder of Successful Ways.
The concessions made in the other states and territories are too minimal to inspire consumer action.
“It helps some, in that they save $500, but it’s not a massive amount,” Durrant said, highlighting that such slim savings are unlikely to have an impact.
Rather, what matters far more for hopeful first time buyers, is the accessibility of finance.
“Prices have dropped. Rates are cheap. I can’t think of a better time for a first home buyer to buy. So, it all comes down to the amount you can borrow,” said Durrant.
Further, Durrant believes that consumer awareness and interest in the opportunity presented by the current market is at its peak.
“It’s on the news. People are talking about it. They want to know what it’s about. They’re aware there’s a good opportunity,” he said, adding that his first home buyer education classes have never been as full.
To Durrant, it seems that stamp duty reform across the country – with the exception of the ACT – has accomplished little aside from contributing to this budding consumer awareness of the market.
APRA serviceability changes and the approach of spring are both more likely to jolt the market back into action, he concluded.
