Property taxes delivering more and more revenue

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More than half of all taxation revenue gathered by state and local governments in the 2014-15 financial year came from taxes on property.

Analysis of Australian Bureau of Statistics figure by CoreLogic RP Data has revealed that over the year taxes on property generated $45.2b in revenue for state and local governments.

That figure is 50.6% of the total $89.2b worth of tax revenue collected by the two levels of government over the 12-month period.

Over the year, the total amount of tax revenue collected by state and local governments increased by 7%, while the proportion of that which came from property taxes increased by 10.5%.

According to CoreLogic’s analysis, since the 1999-00 financial year, total state and local government taxation revenue has increased by 103% compared to a 150% increase in property taxation.

Of the individual property taxes, stamp duty and municipal rates account for the majority of revenue created at 40.8% and 35.4% respectively.

Land tax accounts for 14.8% of revenue generated from property.

According to CoreLogic’s report, the fact that stamp duty accounts for such a significant proportion of the revenue collected should be a “concern.”

“The fact that stamp duty is now the greatest source of tax revenue for state and local governments must be of some concern,” CoreLogic said.

“This is due to the fact that it is a tax on transactions unlike municipal rates and land tax which are taxes on the property. Transaction taxes are entirely reliant on the market and while they surge when values and transactions are rising, when either or both fall this source of revenue drops significant.”

CoreLogic argues that a replacement of stamp duty with a more wide reaching land tax would be a more suitable option for governments as a well as buyers and sellers.

“Property taxes are the most important sources of revenue for state and local governments; however the reliance on volatile stamp duty revenue provides challenges for these governments.”

“This is a good reason to advocate for the replacement of stamp duty with universal land taxes. Although no one likes a new tax, it provides more revenue certainty to local and state government and it doesn’t deter the buying and selling of properties like stamp duty’s impost can.”

While CoreLogic’s report may advocate for its removal, the fact that stamp duty generates so much revenue means it’s unlikely to be going anywhere.

“I don’t think stamp duty will be removed. It would just be too big a loss for governments if they got rid of it,” Sam Saad, solicitor at Clinch Long Letherbarrow Lawyers.

“I think it’s one of those things that people are used to now and they just account for it when they buy or sell a house,” Saad said.

Joanne Seve, a state taxes consultant who has specialised in stamp duty since the 1980s, also believes stamp duty is likely to remain, however she does argue governments should make some changes.

“Stamp duty at the moment is a bad tax and it’s bad tax for a couple of reasons. One is that the rates are two high and the other is bracket creep,” Seve said.

“When we have seen stamp duty rates reduced we haven’t seen revenue fall because transactions increase,” she said.

Seve believes addressing bracket creep and reducing the rates of stamp duty would lower the impact the levy has on inflating property prices, however she doesn’t agree with the idea of replacing it with a broad-based land tax.

“I don’t support the idea of replacing it with a land tax because that would be taxing the family home which isn’t and income producing asset.

“As land gets scarcer, values will increase and that means each year people will just be paying an increased amount in land tax on their family home and that’s something I just can’t support.”
 

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Comments
  • Peter Wrigley says on 03/05/2016 04:46:36 PM

    I have read the article and I don't disagree with any of the comments, however I voted for GST on the basis that Stamp Duty and Land tax would be removed amongst other state taxes. This has not happened and in the real commercial world one would be sued for misrepresentation and most likely you would have lost your shirt because of the legal costs you would have to have paid to fight such a claim. In short we were lied too and of course there is not accountability on the part of the politicians just like the Health Payroll debacle. Is it just me or was that when Labor was in power?

    All land holders are being discriminated against. Why? because there a basically only three types of assets: cash, shares and property, everything else is a derivative of these three main assets. However only one is taxed more than the others. guess? yes property.

    It would be interesting if you started charging people with cash in the bank a cash tax and shareholders a shareholders tax. It would be fairer but could you imagine the hew and cry you would hear. so lets make it fair and charge them the same as they do the poor land holder.

    OR Charge no taxes but GST at 10% plus a flat 20% income tax and you should in principal end up with a 30% tax rate. No more wastage on government employees and we could probably get rid of state governments.

    Lets starting treating our economy as a business!

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