There have been few issues as contentious as stamp duty when it comes to real estate in Australia. With many states having already announced their budgets for the year, opportunities have been missed to address what the Housing Industry Association (HIA) calls the country’s most inefficient tax.
Fortunately, while some states and territories have taken a step backwards, others have embraced progress. The South Australian government has announced in its budget that it will remove stamp duty from commercial real estate transactions over a three-year period. The Property Council of Australia reports that the first measures will be in place from 1 July 2016, and will progress until the tax is abolished on 1 July 2018.
“The removal of this deadweight business tax is a green light for investment and a positive platform for investment hunting, and will also accelerate transaction activity across the state,” said Property Council SA executive director Daniel Gannon.
He went on to note that it’s not just those trading in real estate in Adelaide and surrounds that will benefit from this decision. Mr Gannon pointed out that SMEs and family businesses will be in a great position to make the most of this change, and that the broader community could benefit too.
“Fewer taxes mean greater prospects of job creation and economic stimulation, particularly in the wake of this month’s worrying jobs data.”
It should be noted though, that while this announcement is major progress for South Australia, some see it as only a step in the right direction, with plenty more room for movement.
“We welcome the treasurer’s acceptance that stamp duty is an inefficient tax and the intention to withdraw it on commercial property sales. But it follows that there is an equally compelling case to remove it from residential property,” said Robert Harding, HIA executive director.
However, not all states and territories will be as lucky with their governments’ announcements. Even the ACT, which committed to removing the impost over a 20 year period in 2012 has changed tack, according to the Property Council.
“While we’ve supported the ACT government’s commitment to taxation reform, the chief minister is now reneging on a promise made to the Canberra community to make property taxes fairer, more equitable and more efficient, ” said Ms Carter, ACT executive director for the Property Council.
There have been calls for some time to have stamp duty put up for renegotiating or even abolition, and Real Estate Institute of New South Wales president Malcolm Gunning appreciates that the recent tax whitepaper has given governments the fuel they need to make the change.
“We are excited by the recommendations made that state and territory governments phase out conveyancing stamp duties,” he said.
Mr Gunning went on to encourage the NSW government to take advantage of this opportunity and reduce the cost of houses for sale in the state by removing the outdated tax. The Property Council of Australia takes a similar stance, encouraging all governments to consider the case for removing stamp duty.
“The federal treasury and two major tax reviews have concluded that stamp has the highest cost to living standards and economic growth,” said executive director of the Property Council, Ken Morrison.
Mr Gunning has said that the tax was never meant to be applied in such an unforgiving manner, and that first home buyers are the ones who are suffering. Bracket creep is another major consideration as homes for sale increase in price. To give context, Mr Gunning quoted Ken Morrison, pointing out that the stamp duty rates were established in 1986, when the average home cost $75,000 to purchase.