The Property Council of Australia’s (PCA) press release on 30 March 2015 indicates that it a nation-wide debate on tax reform, including whether or not the abolition of transfer duty on conveyancing is appropriate, will be welcomed.
“Stamp duty inhibits economic activity, it acts as a drag on new construction, on job creation and housing mobility”, said Ken Morrison, the chief executive of the PCA.
Mr Morrison supported the research from the government’s recent ‘Re:think’ tax discussion paper for its critique of transfer duty. The paper stated transfer duties on conveyances are a highly volatile tax because revenue growth is directly parallel to property prices and transaction amounts, which are constantly fluctuating. The tax is therefore on transactions rather than value. As a result, transfer duties negatively impact consumers by increasing the cost of buying a house as prices often escalate over time.
Upon analysis of these factors, it was ultimately determined that stamp duties are some of the most ineffective and inefficient tax systems in Australia. With the current unadjusted progressive tax rates, the stamp duty becomes a significant burden. For example, transfer duty on the average home in Melbourne is nearly twice as much as it was 24 years ago, going from 2.67 per cent of the sale price in 1988 to 5.16 per cent in 2011.
The debate centres around what are the best alternatives or solutions to reform the current tax. Several ideas have been proposed.
The first is to replace stamp duty with another tax on property to balance any changes to asset prices as a result of tax reform. Another is to levy land tax depending on the value of the land per square metre, which is a more accurate and efficient representation of the stamp duty figures. The third is to instigate a broad-based land tax, whereby all owners of property pay an annual tax rather than at the time of purchase.
If you are currently involved in a conveyancing process, seek legal advice about how stamp duties may be affecting you.