An end to stamp duty: could it happen?

Stamp duty taxes need to be eliminated – and first home buyer grants do little to bandage the wound, according to some industry spokespeople.

A recent opinion piece by Robert Carling in the Australian Financial Review claims state governments enjoy real estate booms because rising prices and turnover combine to send stamp duty revenue ‘gushing’ into Treasury coffers.

“But the states’ reliance on this source of revenue is unhealthy and highlights the need to rethink how states are funded,” Carling said.

Tasmanian Smartline broker, Richard Denholm, largely agreed, saying stamp duty is ‘nefarious’ for first home buyers.

“For the first home buyer, it’s a big barrier because normally they have LMI as well.”

His state government has recently increased its first home builder (FHB) grant to $30,000 – something Denholm believes will help alleviate financial pressure on first home buyers. He warned that there are also likely to be unwanted side-effects.

“For what the [Tasmanian] government’s trying to do, which is stimulating things, the grant will do that. It will cover the stamp duty and LMI; for some people it might eliminate stamp duty…There is quite a bit of stock on the market, so long-term it might have an effect by pushing up prices.”

Furthermore, he says, the FHB grant is only for purchases of newly completed properties, or for buyers that are planning to construct.

“An unintended consequence could be that properties in the bottom of the market – there could be a lack of movement there.”

Rate Detective Finance broker Warren Dworcan said policy makers would need to devise other ways of earning revenue before abolishing stamp duty entirely.

“It would be nice in that it would increase property activity, although state governments would need to find alternative ways to supplement the stamp duty revenue, which may cut into vital services so I’m not sure it would be viable.”

Dworcan also says the negative effects that stamp duty can have on first home buyer figures in particular varies from state to state.

“The various governments may lower it to increase activity or raise it to put more money into different areas so it affects people in many ways… It’s a lucrative way for state governments to bring in revenue to spend on their economy for progress. However, it’s a hefty cost for people buying a property.”

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Comments
  • GB says on 21/11/2013 05:17:03 PM

    ACT already has this 'innovation'. And guess who pays for it? All rate payers!. As the duty drops, the rates go up. We will be paying $5,000 for basic land rates which are currently $1,000 in a few years time. Dumbest idea ever. Pushes up rents too.

  • Keith Vic says on 21/11/2013 09:53:07 PM

    Why doesn't State Governments change the law so that the seller pays the stamp duty on the sale of the property. Maybe Govmts think that distressed owners may have bankruptcy creditors that will gobble up the home value, but that's what caveats are for.
    The first homies can get their foot in knowing that the stamp duty is delayed until the sale of their property. PS..Im only a factory hack so maybe not smart enough to see the bloomin obvious.

  • Jose says on 22/11/2013 10:38:34 AM

    Or, as in WA, first home buyers could be exempt from stamp duty for homes under 500K. If you are a first home buyer buying over $500K, you can afford stamp duty, or suck it up and buy cheaper.

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