If you’re buying or planning to sell real estate at the moment, you will be intrigued by the intensifying debate surrounding the issue of stamp duty vs land tax.
Articles have been appearing in the press with greater frequency as political leaders and real estate investment and taxation commentators argue over the merits of replacing stamp duty with increased land tax.
As a leader of South Australia’s largest team of conveyancers, I have the benefit of overseeing numerous conveyancing transactions and can share some observations from this perspective.
Who should win in the Stamp duty vs land tax debate?
I have written previously about stamp duty and noted how community sentiment is in favour of abolishing it but governments seem reticent to talk about taxation methods for compensating for the subsequent loss of revenue.
In my article, Has South Australia got Stamp Duty licked? This conveyancer says not yet!, I noted:
Firstly, at a purely selfish level, our business would grow because I believe the change would remove a heavy barrier stopping people from upgrading or downsizing properties, which means more work for us as conveyancers. However, from a community perspective, our economy would benefit from increased activity due to all the flow on effects when families move homes.
There is no doubt the cost of stamp duty makes many families put off moving house, even though a move would better suit their stage of life or work/school needs.
When the impost and even the fear of the impost of this ‘dead money’ leads to inaction, the community misses out on ‘activity’ and that is the engine for a healthy, local economy.
Of course, this view needs to be balanced by the understanding that using land tax to compensate the state for loss of stamp duty revenue means families and real estate investors would face new, annual costs of taxes levied against the value of their property holdings.
So, like many aspects of public policy, the ultimate answer will not be clear cut.
Gently does it: The ideal transition away from stamp duty
While recent articles like Junk stamp duty for land tax (Financial Review, April 5, 2016) and Push to get on with the business of cutting stamp duty (The Advertiser, April 4, 2016) outline a strong case for removing stamp duty, our training in understanding how even simple transactions have ramifications, leads me to urge caution.
I think as long as there is an appropriate phase in and phase out approach, or at least some appropriate recognition for people who have just paid stamp duty so they are not lumped with land tax straight away, then that is the most sensible solution.
We think the State Government’s moves to fast track abolishing stamp duty on business transfers and the reduction for commercial property has been a step in the right direction; now we are watching with interest to see how and when it can navigate the next move in reforming taxes and charges surrounding residential real estate.
