Land tax: What investors can do to minimise it
When purchasing an investment property, land tax is one of the hidden costs that property investors often don’t take i...
REIWA is urging the Western Australian government to address one of the biggest financial hurdles for future property buyers by committing to stamp duty reform.
Recognising the importance of stamp duty as a key revenue earner for the WA government, REIWA president Damian Collins warned that the “inefficient” and “inequitable” tax was ultimately a handbrake on the economy.
As such, Mr Collins has called on the government to commit to reforming stamp duty in the 2021-22 state budget, noting that it “actively discourages” home ownership and makes it more difficult for people to move frequently.
“Our state’s finances are enviable. We have navigated the challenges of COVID-19 relatively unscathed and are one of the only economies in the world thriving right now.
“If there was ever a time for the WA government to implement bold reform to help alleviate housing affordability pressures on West Aussies, now is it,” Mr Collins said.
REIWA’s proposal encompasses four key areas of reform, including a two-stream revenue collection method for stamp duty, a concession for over 65s, a permanent off-the-plan stamp duty rebate and a productivity booster for small business.
According to Mr Collins, by offering purchasers the choice to pay the hefty tax upfront or opt for an ongoing annual fee, calculated at the purchase price of the property, WA would “remove one of the biggest financial hurdles buyers face”.
A 2020 survey conducted by REIWA of more than 1,000 people revealed that over 90 per cent considered stamp duty to be a significant barrier to home ownership, while 60 per cent said they would opt for an ongoing annual fee if given the choice.
Moreover, in order to ensure seniors aren’t being prevented from right-sizing into more suitable accommodation, REIWA has touted a $10,000 stamp duty concession for all people aged over 65.
“Targeted stamp duty relief for seniors would assist with these upfront costs and help them to right-size into more suitable accommodation, which would free up housing stock and assist with mobility across the whole market.”
REIWA also believes it’s time to lock in the stamp duty rebate for off-the-plan purchases, which is due to expire in October 2021.
Plugging its importance to the state’s economy, Mr Collins noted that by incentivising the purchase of multi-unit dwellings, the government would ensure ongoing construction work while reducing urban sprawl.
“The current 75 per cent stamp duty rebate for off-the-plan construction apartments has been essential in ensuring an ongoing pipeline of projects. We believe that without this ongoing incentive, the demand for apartments will soften, impacting the steady supply of diverse housing and the creation of jobs for West Australians.”
Last on REIWA’s agenda is the removal of stamp duty on the purchase of small businesses – a practice followed in Victoria, NSW, Tasmania, South Australia and the ACT.
“As one of the only places in the country that still collects stamp duty on business assets, we are creating a business environment that is less competitive than the eastern states and placing a cost burden on small businesses, which discourages productivity and the entrepreneurial spirit.
“With more people making career changes than ever before, we need to pave the way for those who want to have a go,” Mr Collins said.
Mr Collins is not alone in calling for reform. In fact, just last month the National Housing Finance and Investment Corporation (NHFIC) released a report suggesting that removing stamp duty could increase housing mobility, leading to more efficient use of the nation’s housing stock.
The NSW state government has already announced that it plans to phase out transfer duty in favour of a land tax, with a progress paper recently released indicating an opt-in-opt-out arrangement, whereby buyers will have the option to pay the tax at the point of sale or pay a much lower land tax annually for the full tenure of ownership.
The ACT government has been slowly reducing transfer duty and increasing land tax since 2012 and plans to have the duty entirely phased out by 2032.