Public policy report calls for axing of volatile stamp duty
Stamp duty “punishes” first home buyers and should be replaced with a “fairer” version of land tax in New South Wales, a new report by the McKell Institute has stated.
The not-for-profit organisation released a paper accusing the government of holding on to an antiquated system that could be abolished altogether if the right land tax were to replace it.
“Stamp duty is an unfair, volatile and inefficient form of taxation,” wrote public policy academics Peter Bentley and Marieke D’Cruz.
As it stands, the tax accounts for one quarter of the NSW government’s revenue and has a huge price tag for those looking to buy a first property.
“It can represent over a quarter of up-front costs for first home buyers (often making home ownership prohibitive), and inhibits mobility as homebuyers avoid the tax,” the paper noted.
Stamp duty applies each time a person buys a property, but cannot be included in the mortgage. This means that first home buyers not only need to save for a deposit (which is usually upwards of 10% of the total value of the property), but stamp duty as well.
For example, as the Mozo stamp duty calculator reveals, if you wanted to buy a home at the current median house price in Sydney of $1,025,478, you would have to factor in an extra $41,893 for stamp duty costs.
But if a new land tax was enforced instead, it would ease the burden of having to pay a lump sum upfront by being in the form of yearly council rates.
Proposed features of the new land tax in the paper include all land being valued equally per square metre, so those with larger portions of land would need to pay more tax.
The report also argued that abolishing stamp duty would see an improvement in the employment rate because homeowners could relocate without having to save for the cost of stamp duty.