The Real Estate Institute of Western Australia (REIWA) is calling on the federal government to lead national reform on stamp duty at the upcoming Economic Reform Roundtable, while also urging no changes to investor tax settings to protect rental supply.
The call comes as WA’s housing crisis worsens. A new Bankwest Curtin Economics Centre report found more than 210,000 households now view their housing as unaffordable – a 91% increase in just two years – with just 39% of renters and 48% of mortgage holders in the state considering their housing affordable.
REIWA president Suzanne Brown (pictured) said stamp duty was a highly inefficient tax that significantly impacted productivity.
“Stamp duty is effectively a tax on moving,” Brown said. “It leads to the inefficient use of housing by constraining a household’s capacity to move to take advantage of new employment opportunities or to downsize to a more appropriately sized home.”
She warned the tax discouraged labour mobility within cities and across the country, affecting travel times, costs, and employers’ ability to recruit staff.
“Commercially, stamp duty can deter businesses from relocating to larger or more appropriately located premises, or purchasing additional premises,” Brown said. “This limits business growth, output and employment opportunities, and in turn, the broader economy.”
In Western Australia, residential stamp duty is calculated on a progressive scale. For example, for a property valued at $500,000, the stamp duty payable is $17,765. First-home buyers enjoy exemptions or discounts – properties up to $450,000 are exempt, with concessional rates applying up to $600,000.
REIWA has long advocated replacing stamp duty with a broad-based land tax. Brown said this would allow people to move to homes that better suited their needs, improve labour mobility, reduce commuting costs, and encourage more productive land use and commercial investment.
While stamp duty is a state-based tax, the REIWA said the consequences were national.
“Although levied by state and territory governments, the economic inefficiencies created by stamp duty have profound consequences for national labour mobility and economic development,” Brown said.
She added that the transition to a land tax would affect state and territory budgets, so the federal government should incentivise reform with financial support, citing the $3 billion New Home Bonus as a precedent.
REIWA, which reports units are on track to outperform houses in price growth this year according to its latest quarterly property update, is also calling for stability in investor tax policy to help ease the rental shortage.
“The rental market provides an essential role in productivity via labour mobility and availability, particularly in regional areas,” Brown said.
In WA, she noted, rental shortages have made it harder for regional businesses to find staff, with some forced to scale back or close.
“We know investors are sensitive to legislative change,” Brown said. “There were dramatic impacts in WA following the deeply unpopular COVID rental legislation.
“While other factors also came into play, this policy, and potential changes to the Residential Tenancies Act, played a role in a mass exodus of investors in a fairly short period of time. This reduced rental supply by nearly 9%, or 20,000 properties, and contributed to the rental crisis of the past few years.”
A recent REIWA survey found 83% of respondents said changes to property taxes would influence their decision to sell, and 82% said such changes would deter them from investing.
“REIWA recommends there be no changes to negative gearing or capital gains tax for investors,” Brown said. “With the nation in the midst of a rental crisis, stable tax settings are essential, otherwise investors will exit the market, potential investors will be deterred, and the current crisis will be perpetuated.”
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