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There is more than one option for the phase out of stamp duty and REIA’s focus is to get this important conversation started.
The phasing out of stamp duty requires strong collaboration across government and alternatives must recognise that property tax plays a key role in funding key services.
REIA believes that a broad-based consumption tax is the fairest but the most difficult alternative to implement. All options should be on the table when it comes to this big picture national reform.
Any alternative pursued must also include transitional arrangements and such arrangements should avoid any homeowners having to pay additional tax.
One proposed way of doing this is securitising future property tax receipts, as suggested by Professor Kevin Davis from the Australian Centre for Financial Studies.
REIA’s view is that a conversation between state and territory governments must start in earnest with a view of having a universal solution to stamp duty phase out.
There are several sensible alternatives for government to consider, with government best placed to lead a national discussion and build consensus with Australia’s state and territories.
This should result in the best options being presented to and consulted with the Australian people
Holistic tax reform?
Holistic tax reform is the best approach with greatest benefits.
Land tax has potential if done correctly as it is a more efficient tax than stamp duty with greater economic and social benefits.
Land tax as an alternative would offer improved affordability, including the transaction costs of buying property.
It has also historically been more palatable for governments.
REIA supports a broad-based consumption tax and broadening/increasing GST is one way of doing this
However, this approach would require compensation to lower income earners who would be negatively impacted but would also benefit from greater economic growth coming from the reform.
Buy now, pay later stamp duty?
Buy now, pay later stamp duty is an easy approach for state governments as it only impacts state revenues in the short term.
This option helps first home buyers enter the market, but broader economic benefits are limited.
Stamp duty phased out for first home buyers and downsizers repurchasing only?
As for ‘Buy now pay later,’ but with even smaller economic benefits.
No. The market is driven by a number of factors, primarily interest rates.
REIA and SQM’s research found stamp duties had increased and this didn’t stop price increases.
Stamp duty has constrained first home buyers and others to move. By making it easier for people to move, more property will come onto the market and improve housing prices.
No. Replacing one tax does not mean you get rid of another tax arrangement, especially as the retention of negative gearing is a benefit to the Australian economy.
Negative Gearing is a legitimate deduction of expenses while earning income and the ability of investors to use debt is a crucial part of investing. Without negative gearing, investors would be disincentivised to supply rental properties, decreasing rental supply and adding to rental stress.
This exact consequence was recognised by the Henry Review.
This figure comes from 50% REIA’s commissioned research by SQM, which found that, due to stamp duty, market liquidity is 50% lower over 20 years
The removal of stamp duty benefits the entire economy. Yes, this does include agents, but not to the detriment of others.
Removing stamp duty would improve utilisation of housing stock increasing market turnover, meaning more listings for home buyers and meaning more affordable prices.
REIA acknowledges that the removal of stamp duty must be offset somehow for governments to continue to provide services.
There are a range of reform options for Australian Governments to roadtest and model out on a national basis and ensuring this conversation happens is our priority.
Current property owners do not gain any more from the removal of stamp duty than any other Australians.
All Australians benefit in the same way from lower barriers to buying property and increased mobility.