Australia’s most hated housing tax – stamp duty – could be phased out under a reform plan to be unveiled this month, but there’s a catch.
Economists are urging the state governments to phase out the big sting of stamp duty when you buy a new home with a general property tax to be paid quarterly.
If adopted, it could save homebuyers around $40,000 when purchasing in Sydney and Melbourne but they would then pay the tax – and possibly more – in a new annual property tax over decades to come.
As the Morrison government rolls out a new $250,000 HomeBuilder grant to support the construction industry during the coronavirus pandemic, behind the scenes it is urging the states to consider extending stamp duty exemptions beyond first-home buyers.
In Sydney, homebuyers are being slugged over $40,000 in stamp duty on average when purchasing a million dollar home.
In Adelaide and Perth it’s over $20,000 for a median home with Hobart not far behind. But Queenslanders in Brisbane only pay around $11,000 on average.
Currently, eligible first-home buyers in NSW secure a stamp duty exemption on houses worth up to $650,000 saving purchasers up to $26,000.
Combined with NSW’s $10,000 first-home owners grant and the Morrison Government’s new $25,00 Homebuilder grant that’s $61,000 in grants and tax concessions for eligible first-home buyers to build a new home.
NSW Treasurer Dominic Perrottet told news.com.au that the Thodey review into federal relations, led by former Telstra boss David Thodey would outline options for stamp duty and payroll tax reform.
Mr Perrottet has now been handed the finalised report and will consider its calls for major reform of stamp duty taxes.
“NSW has led the push for reform over the past couple of years and as Treasurer I believe it is incumbent to look at all the options we have to create jobs, boost business and grow our economy,’’ he said.
“We are very open to working with the Commonwealth and Federal Treasurer Josh Frydenberg on improving the tax system. If that involves a way to further reduce payroll tax and benefit businesses and create jobs, it is a high priority for us,’’ he said.
“With all states and the Commonwealth facing unprecedented economic challenges we have the opportunity to work together on some serious reform.”
Two former Treasury secretaries, Ken Henry and Martin Parkinson, have both urged the Thodey review to dump stamp duty taxes because they create an unfair hurdle for first home buyers.
“It’s just a bad tax,’’ Dr Henry said.
“It’s a big obstacle for first-home buyers – saving for the deposit and then saving for the stamp duty – it’s just nuts.
‘‘Particularly in Sydney, it’s a massive bill they’ve got to pay.
“If stamp duty were abolished and replaced with an annual land tax, of course, over a 15-year period – or whatever it is – they’ll end up paying the same amount. But they don’t have to come up with all the cash up front.”
In Canberra, the ACT has moved to phase out stamp duty and replace it with annual land tax bills but the ‘rates’ charged can be eye-watering at up to $5,500 a year or more depending on the size of your property and the land valuation.
As the NSW Government considers the findings of the Thodey review, the Tasmanian government has already announced it will expand its first-home builders funding of $20,000 for any owner-occupier to build a house.
That means that eligible Tasmanian families can now secure $45,000 in grants to build a new home even if they are not first-home buyers.
Tasmania has also announced plans to commit $100 million for social housing under a new package in response to the coronavirus pandemic.
In Victoria, the Andrews Government is extending the $20,000 First Home Owner Grant for people buying or building a new home in regional Victoria until mid 2021.
Three years ago, the government doubled the regional First Home Owner Grant from $10,000 to $20,000 to tackle housing affordability.
The grant is available for first home purchases across 48 councils, including Greater Geelong, Ballarat, Bendigo, Wodonga and Shepparton.