The Western Australian branch of a property development lobby group has broken ranks with its Federal body by calling for stamp duty to be replaced by a new land tax to help downsizers.
The WA division of the Urban Development Institute of Australia (UDIA) on 21 March launched its pre-budget submission which called for property transfer stamp duty to be replaced with a new ongoing broad-based land tax system.
“As well as being an impairment to housing affordability, stamp duty is a significant barrier which prevents households from transitioning between dwelling typologies, restricting retirees from ‘downsizing’ and families ‘upsizing’ as their circumstances and housing needs change,” the submission states.
“UDIA strongly advises that the Government undertake a comprehensive review of State based taxes and gives consideration to the establishment of a broad based land tax system which distributes taxes more equitably than the current stamp duty regime.”
Such a move would lead to an annual land tax bill being added to council rates notices, including for the family home.
However, it also would have the obvious benefit of abolishing the one-off cost of stamp duty on property purchases - currently $30,600 for a median Perth home valued at $767,000.
Federal UDIA position differs
The WA UDIA approach differs to the Federal UDIA, which in November last year agreed that stamp duty should be scrapped, but that it be instead replaced with an expansion of the GST into unspecified new areas. This position was outlined in the organisation’s national policy priorities issued in November last year.
This position reflects a view among property development circles that the "replace stamp duty with land tax" idea is a hard political sell and also continues to place a high tax burden on the industry.
“UDIA advocates for the broadening of the GST base to capture more revenue....the reform could substantially lift revenues and deliver the states and territories the income required to start reducing, and ultimately eradicating, inefficient taxes such as stamp duty,” the paper says.
The Federal UDIA says it is not calling for the rate of the GST to be raised, and also says that any change to the GST base may require compensation for lower-income groups.
Stamp duty a major barrier to downsizing
Behind the challenge of finding the right property, stamp duty is effectively the number two reason stopping people from downsizing. A survey of the Downsizing.com.au community last year found that 41 per cent of people nominated “transaction costs of buying and selling” as the issue which is “holding them back” from downsizing.
The ACT Government is leading the way in Australia with its stamp duty eradication policy. The government is phasing out stamp duty over a 20-year period from 2012 and replacing this with an “efficient and equitable rates system”.
Call for downsizing stamp duty cut
The WA UDIA says that if the government is not willing to scrap stamp duty, it should as a “short term” option introduce a downsizers’ stamp duty concession for seniors moving into homes more suited for their needs.
“WA is facing a significant aging of the population and our current housing stock is poorly equipped to manage the needs of our future communities,” the WA UDIA submission says.
“The introduction of stamp duty concession for seniors will remove one of the most significant barriers that prevents these people from moving to more appropriate homes.”
The former WA Liberal Government had promised such a concession in 2017, which would have seen a stamp duty discount of up to $15,000 for new and established homes to the value of $750,000. However, the Liberals were then tossed out of government and the incoming ALP Government did not support this measure.
The WA 2019-20 Budget is expected to be handed down in June 2019.