Groups have renewed their calls for the removal of stamp duty in New South Wales as the state government opens up public consultation on tax reform.
Adrian Kelly, president of the Real Estate Institute of Australia, said stamp duties on the transfer of property are the second-largest source of tax revenue, generating 24% of the overall state tax revenue.
However, they are a highly volatile tax, with revenue fluctuating by over 50%. “Stamp duties on conveyances are inconsistent with the needs of a modern tax system and should be replaced with a more efficient means of raising revenue," he said.
David Bare, executive director for the Housing Industry Association, said the inefficiency of stamp duty as tax makes it crucial for the state government to consider removing it.
Bare said the impacts of the COVID-19 outbreak on the economy, housing market, and population growth reflect the weakness of stamp duty as a source of state revenue.
"Stamp duty is an inequitable tax which falls on a small cohort of taxpayers who need to move for varying reasons including for employment, education and training, health or financial reasons," he said. "It has a disproportionately high impact on vulnerable households who face significant changes in their life circumstances such that they need to move."
Bare said stamp duty depends on two main factors: the dwelling prices and the volume of transactions occurring in the market. This means that this tax scheme is subject to "the whims of the property market".
"When the property market is booming, stamp duty provides windfall revenues. By the same token in times of property market weakness, stamp duty revenues also fall and weigh on budget outcomes," he said.
However, stamp duty bills have increased almost three times faster than house prices since the 1980s. In NSW, the typical stamp duty bill increased from 1.6% to 3.8% of the median dwelling price between 1982 and 2017.
"Stamp duty rates have not been reformed since 1985, when the average house price was $70,000. Increases in home prices cause stamp duty bills to accelerate because stamp duty rate brackets are rarely updated. This is the problem of stamp duty creep," Bare said.
Ray Ellis, CEO of First National Real Estate, said first-home buyers would benefit the most if stamp duty is axed.
"First-home buyers would certainly be beneficiaries because they wouldn't need to save as much cash to buy their first home," he said.
There are proposals to replace stamp duty with a broad-based land tax. However, Ellis said doing so would put asset-rich but cash-poor Australians at a disadvantage.
"These are the people who budget carefully so they can stay in their much-loved homes, near to family, friends and essential amenities. Millions of Australians, including this group, would be required to pay bills annually that are the equivalent of council rates, or potentially much more," he said.
Ellis said this raises concerns on whether these Australians would be double-taxed or would they be forced to sell. Furthermore, he expects this would compel older Australians to consider reverse mortgages.