Removing the stamp duty would greatly benefit homebuyers and increase buying and selling activity, according to a new report.
The National Housing Finance and Investment Corporation (NHFIC) report on stamp duty reform found that the tax imposed a high cost on households and was a barrier for many people seeking to increase or reduce their workforce.
He noted that a household who bought the house at the median price in Sydney four times in the past 20 years would have paid more than 10 times the amount of stamp duty than a household making only one purchase in the past 20 years. beginning of this period.
The report comes as reform gathers momentum, with the New South Wales (NSW) government seeking to replace stamp duty with a lower property tax, joining ACT which is in the process of even.
In New South Wales, the current proposal would not affect existing owners, so they would not effectively be taxed twice.
As a result of soaring house prices, New South Wales stamp duty revenue reached $ 9.379 billion in fiscal year 2020-21, a sharp increase from the $ 6.95 billion in 2019-2020 and $ 7.4 billion in 2018-19.
The NHFIC report said removing the stamp duty would lead to an increase in values ââinitially, but this could be taken into account by lenders when assessing potential borrowers.
âThe removal of transfer taxes in favor of a generalized property tax will likely increase house prices in the short term, as the removal of transfer taxes is capitalized in prices,â he said.
âHowever, if lenders fully capitalize the cost of the alternative property tax in the loan service criteria, the impact on the price of waiving fees may be negligible.
“The data shows that house prices and the number of transfers have both increased in ACT during the transition period.”
The report found that Victoria, which has the highest transfer duty rate in the country, had the most to gain by switching to a property tax.
Australian jurisdictions were 40% more sensitive to tariffs than many developed European countries, but the reforms would bring “substantial” benefits, including more efficient use of building stock and improved labor productivity.
Transfer outside the transfer duty
With stamp duty being such an important source of revenue for state and territory governments, the report noted that there was a range of options available for smooth reform.
A short phase-out period, over five years instead of 20 for example, could help limit the impact of house price growth on the cost of the transition.
Reimbursing households that have recently paid the rights would not result in reduced property tax revenues, and asset-rich and cash-poor retirees could defer all or part of their property taxes until their property is sold.
The report noted that the cost to homeowners of a new property tax was “unlikely” to be passed on to tenants, but it can be legislated to make this illegal.
“Real estate investors generally have a relatively short period of ownership compared to owner-occupiers and the additional turnover generated by the removal of transfer taxes can disrupt rental contracts and tenants’ leases if protection is not provided. implementation, âhe said.
Photo by Mason B on Unsplash