Australia has begun to emerge from the height of the COVID-19 pandemic, and with the national vaccine rollout underway, changes to stamp duty have come into sharp focus.
Stamp duty, or land transfer duty, comes into effect when people pay a tax to buy or build a home. Across Victoria and NSW alone, stamp duty accounts for 25 per cent of the state’s total revenue.
First home buyers in Victoria may be eligible to receive a reduction or exemption on stamp duty when purchasing their first home. Eligible homeowners should ensure the dutiable value of the property is $600,000 or less. In most cases, the dutiable value of a property is the contract price you pay for it. However, if the price you pay for the property is less than market value, the dutiable value will be the market value.
Similarly, NSW first home buyers may receive a concessional rate of transfer duty, or a complete exemption from paying stamp duty. The First Home Buyers Assistance scheme applies to eligible participants who are buying an existing home; buying a new home; or buying vacant land with an intention to build.
But Victoria and NSW have pushed for major reforms to stamp duty in light of the COVID-19 pandemic – as a way of kickstarting the economy in the medium to long-term.
In fact, the NSW Treasurer, Dominic Perrottet, opened the discussion for community members to voice their concerns about the stamp duty system, amid an overhaul to allow buyers to opt out of the tax and instead choose a smaller annual property tax.
Mr Perrottet said stamp duty is one of the biggest financial barriers to home ownership, and changes were required to create a modernised tax system.
“This is the single most important economic reform we can tackle to turn the Australian dream into NSW’s reality.”
“This is a vision for every person and family in NSW – from first home buyers trying to get a foot on the property ladder, to frontline workers moving to service our regional communities, and retirees who are ready to downsize,” he said.
Similarly, the Victorian Government has also placed stamp duty reform on the agenda. The 50 per cent stamp duty concession was brought forward for commercial and industrial properties in regional Victoria for contracts that were entered into after 1 January 2021.
In addition, the Housing Industry Association (HIA) has started Stamp Duty Watch – a quarterly comprehensive analysis of stamp duty policies across Australia. The recent review found new home sales increased by 1.7 per cent in February 2021, when compared to the same time in the previous year.
Preliminary migration data also indicates more Australians left metropolitan centres, like capital cities, in each of the first three quarters of 2020 than at any other time since 2001.
The HIA’s Chief Economist, Tim Reardon, said a more efficient and equitable tax should replace stamp duty. Mr Reardon placed the Federal and state governments on alert to remain focused on the benefits of reforms, rather than the complexity of the transition.
“A constant state of paralysis has resulted in a cascading of tax problems as state governments have become increasingly dependent on stamp duty for revenue. This is despite stamp duty being universally recognised as one of the most inefficient and inequitable taxes that does not provide a stable revenue stream,” he said.
Mr Reardon explained that prospective homeowners should not be penalised for entering the market. “Penalising households for pursuing home ownership does not lead to good economic or social outcomes.”
“Households able to move to a home that suits the size of the family and the location of their employment and studies can lead to a more efficient allocation of public investment in transport infrastructure.”