Powered by MOMENTUM MEDIA
the adviser logo
Compliance

HIA calls for stamp duty abolition

by Annie Kane12 minute read
HIA calls for stamp duty abolition

The Housing Industry Association has called for the abolition of the “inefficient, inequitable and unreliable tax”, highlighting the “inequity” that was caused by stamp duty during COVID.

The industry association for the residential construction and home building industry has released its latest Stamp Duty Watch report for Summer 2021, which reviews policies in the states and territories around Australia.

According to the HIA, Australians are currently paying a stamp duty of $21,210 (when utilising a weighted average of the states).

The report argues that stamp duty is a burden on households, with the cost of the transfer duty having doubled over the past two decades while “tax brackets failed to keep pace with house prices”.

==
==

Moreover, it says that “the inequity of stamp duty was highlighted with the COVID recession”.

“The sudden restrictions on the economy forced households to move to find employment or education,” it reads.

“If they did relocate, many [were] further penalised by the punitive application of stamp duty.”

While the HIA report found that the national stamp duty bill decreased by 1.8 per cent in March 2021 compared with May 2019, this was largely due to Victoria providing stamp duty concessions during the COVID-19 pandemic and the ACT transitioning away from stamp duty towards a broad-based land tax.

The report also summarised the additional mortgage repayments that a home buyer would incur as a result of the additional borrowing required to cover the cost of stamp duty (based on a 30-year loan with an interest rate of 3.87 per cent).

Nationally, stamp duty costs would be the equivalent of an additional $35,000 worth of mortgage repayments over the life of the loan, or an additional $1,167 per year, according to the body.

NSW borrowers would pay an additional $48,077 worth of repayment, or $1,603 per year, while Queenslanders experience the mildest effect with $13,000 or $433 per year. In fact, Queensland has the smallest stamp duty burden, equivalent to 1.7 per cent of the median dwelling price.

The stamp duty “burden”, relative to the median dwelling price across the states, is highest in the Northern Territory, at 4.3 per cent of the median dwelling price. This is followed by South Australia at 4.2 per cent.

The HIA said that when it comes to stamp duty abolition, the “end justifies the means”.

The report reads: “Stamp duty is an inefficient, inequitable and unreliable tax. Almost without exception, it can be replaced with another revenue measure that would be more efficient and equitable.”

For example, the HIA highlighted that the NSW government’s proposal to move from a one-off stamp duty on property transactions to an annual land tax (on an opt-in basis) “could produce the largest improvement in productivity of any other possible reform”.

It added that ACT’s move to abolish stamp duty over 20 years was also “working exceedingly well”.

While the body noted that there are some concerns that households that are asset-rich and cash-poor, such as retirees, may not be able to afford the rising cost of the proposed land tax, it added that the overall “efficiency benefits” of the removal of stamp duty were “extensive”.

These include:

  • creating a workforce that is able to relocate in the pursuit of education and employment opportunities “without incurring punitive taxes”;
  • enabling families to more easily move to homes that suit the size of their family;
  • allowing an ageing population to shift closer to family and medical support leading to a more efficient allocation of land and healthcare resources; and
  • “a better use of land” without penalising low value use of land in areas with high land values.

HIA chief economist Tim Reardon commented: “A constant state of paralysis has resulted in a cascading of tax problems as state governments have become increasingly dependent on stamp duty for revenue. This is despite stamp duty being universally recognised as one of the most inefficient and inequitable taxes that does not provide a stable revenue stream.

“There are numerous strategies that can be pursued to abolish stamp duty, including the phased-in approach or an ‘opt in/out’ arrangement.

“As with all sound economic reforms, the benefits of the reform ensure that households disadvantaged from the change can be compensated. 

“The case in favour of reforming stamp duty is so strong that it doesn’t matter which of these options is adopted, as long as stamp duty is abolished,” he said.

“Penalising households for pursuing home ownership does not lead to good economic or social outcomes.”

He concluded: “This isn’t to ignore the challenges of the reform, as they are significant, but in the case for abolition of stamp duty, the end justifies the means.”

There has been an increasing focus on changing stamp duty in recent months, with RBA governor outlining in December last year that the charge was “a tax on mobility”.

“In a country that’s inherently mobile, we want people to be flexible, to be able to move around in response to jobs and opportunities and family reasons. We don’t want to put taxes on mobility,” he told  the House of Representatives standing committee on economics three months ago.

For these reasons, Mr Lowe said the proposed stamp duty and land tax reforms by NSW and Victoria was “the right thing to do.”

[Related: RBA backs move to axe stamp duty]

stamp duty money house

JOIN THE DISCUSSION

You need to be a member to post comments. Become a member for free today!