Stamp duty could be dumped by next year: survey
Economists are tipping stamp duty could be phased out as early as the end of next year, as state governments seek to stimulate the ailing property sector by making it less expensive to purchase a house.
That’s the key finding from Finder’s RBA Cash Rate Survey, which quizzed 43 experts and economists on the most pressing issues facing the Australian economy.
Finder’s survey showed 69 per cent of respondents were expecting a stamp duty change within 18 months.
“Stamp duty makes the process of buying a home even harder,” Finder insights manager Graham Cooke said.
“Not only do borrowers have to save a 20 per cent deposit, they also need to save well over $10,000 - in some cases more than $80,000 - for a tax that generally cannot be included in your mortgage.
“It’s like an on-the-spot fine for homebuyers.”
Australian Property Investor Magazine reported last week that stamp duty reform would be critical for the nation’s economy to rebound from the coronavirus pandemic, with the impost being described in many circles as outdated and inefficient.
To phase out stamp duty, state governments would likely seek to replace it by broadening land tax, which would likely take at least five years and need to occur in a staged manner.
Media outlets recently reported that NSW and Victoria’s state governments would put in place an opt-in system to ease the transition, with homebuyers to be temporarily given the choice as to whether to pay stamp duty or an increased land tax.
Four out of five economists surveyed by Finder expected stamp duty would either be dumped or be replaced with a land tax.
Mr Cooke said eliminating stamp duty would be a great way to stimulate property markets, but Pitcher Partners executive director Craig Whatman said simply replacing stamp duty with a higher or broader application of land tax also had its pitfalls.
“You might have a choice over some period as a transition, so you could pay up front stamp duty or you could pay an ongoing land tax amount,” Mr Whatman told Australian Property Investor Magazine.
“It is clear that if you were going to bring in that sort of reform that it would have to be over a reasonably long period of time to make sure that you do get some equity between people.
“It’s a very valid question as to whether if you had bought a property in the last couple of years, then they bring in the land tax on the main residence, does that apply to you?”
Mr Whatman said another uncertainty with a stamp duty change was whether it would also apply to commercial properties, or simply be leveled against residential dwellings.
He said any increase in land tax would also likely be a politically unpopular move, even if the government making the change was able to get the message across that it was necessary to rebuild the economy.
“It’s subject to the regime that comes in, because obviously if you put a land tax system on the main residence, people are already paying quite significant council rates,” Mr Whatman said.
“We are not talking about unsubstantial sums, we are talking thousands of dollars potentially per annum on the main residence, and that has been politically unpalatable in the past for state governments.
“Whether that’s changing because of COVID-19, I don’t know, but it’s not an insubstantial additional cost.”