States shout louder for stamp duty changes

States shout louder for stamp duty changes

Posted on Friday, July 17 2015 at 2:29 PM

Several states across the country are calling for more action on the subject of stamp duty and, particularly, the scrapping of it.

The presidents of the Real Estate Institutes of Western Australia and NSW, David Airey and Malcolm Gunning, have called for a wider and “more mature” debate around property tax reform and specifically the role negative gearing plays in the provision of rental housing.

The Reserve Bank of Australia (RBA) this week expressed concern about the high use of negative gearing around the nation, estimated to cost taxpayers $12 billion annually. 

Airey says negative gearing provides much needed rental accommodation across the nation and helps moderate rental prices through the tax breaks to investment property owners. 

“It should be remembered that negative gearing is not a specific tax break but in fact is a tax provision for earning income on assets,” he says.

“It’s too simplistic just to target negative gearing as an issue for review without looking at the wider housing system and the clumsy patchwork of property taxes across the country.” 

Gunning says the REINSW has been highlighting the inefficiencies of stamp duty for too long without action from the state’s government.

“Stamp duty clearly distorts prices and adversely effects property transactions,” he says.

“We have to stop the talk and start to see action. The state has got to put its own self-interest aside for the benefit of the broader economy.

“While we’re calling for an abolition of stamp duty, a first step, as a revenue neutral initiative, is to address the stamp duty brackets, which haven’t been adjusted for 30 years.

“This will have no impact on the state because there is clear evidence that a reduction in stamp duty rates will generate additional sales.”

Gunning says that the REINSW recognises that ultimately, if stamp duty is going to be abolished, an increase in GST will be necessary, which will take involvement from the federal government.

“However, it’s time for the NSW Government to stop hiding behind the Commonwealth and start making real decisions for the future of our great state. Something can and should be done now.”

Airey says that a recent report independently commissioned by the Real Estate Institute of Australia and conducted by ACIL Allen, debunked the myth that negative gearing was a sop to the rich.  

“The report found that two-thirds of property investors earned a taxable income of less than $80,000 per year and that 73 per cent of those who negatively geared owned just one property.

“Too many people are quick to jump on the negative gearing bandwagon with unsubstantiated claims that it adds to overall house prices and doesn’t add to new stock.  

“There is no credible evidence for this and it distracts people from the real issues that contribute to affordability, including stamp duty,” Airey says. 

In its recent pre-budget submission to the state government, the REIWA reiterated its call for reform of property taxes.

“Stamp duty’s the biggest hurdle to the ingoing costs of a new home. It is a huge sum of money and it can also be prohibitive to retirees looking to downsize.

“We need a mature debate about abolishing this inefficient and outdated tax and replacing it with a modest land tax across all owners. This will help greatly with affordability and assist state governments with a more predictable revenue stream,” Airey says, adding that the current federal tax system review is a good opportunity for a mature discussion on taxes, the GST and particularly property taxes. 

“I encourage the Barnett Government to commit to a review of state taxes in the lead-up to the next state election. For too long discussion around property taxes has been ill informed and ad hoc. We really need to pull it all together and thrash out the issues properly in an integrated way rather than focus on isolated bits of what is quite a complex housing system.     

“The problem with property taxes is not negative gearing, it’s negative discussion,” Airey concludes.  

 

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