Video report by Russell Ayres and Charlene Broad.
Additional reporting by Russell Ayres:
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The ACT Chamber of Commerce, Real Estate Institute and the Housing Industry Association all agree that stamp duty is an inefficient tax that must undergo change. This means that it can potentially cost the territory more to collect than it earns, which creates a problem for the ACT Government’s bottom line.
Craig Bright, Deputy President of the Real Estate Institute of the ACT, said that stamp duty is also an unreliable revenue base for the territory.
“There’s no question stamp duty has always been a very inefficient tax from the government’s perspective. Primarily because they’re relying on fluctuations in the market and it’s very difficult for them to have a base revenue from stamp duty,” he said.
Reforming stamp duty was also a recommendation of the Henry Tax Review, which also characterised stamp duty as an inefficient tax.
It also adds to the price of purchasing property in the ACT. Canberra currently has fairly expensive housing. Allhomes.com.au lists the median house price at $510,000 with the average unit price at $407,900. Based on those prices, the stamp duty amount is as follows, compared with the rest of the nation:
It is a particular problem for the ACT considering the close proximity of New South Wales. The commute from over the border can be relatively short, and as a result, home buyers may be tempted to purchase homes in New South Wales due to the lower rate of stamp duty.
Neil Evans, ACT/Southern New South Wales Regional Executive Director, of the Housing Industry Association said that if the ACT doesn’t do something significant about stamp duty, it is in danger of losing first home buyers to New South Wales.
John Miller, executive director of Master Builders ACT, said that the threat of large amounts of people moving out of the ACT to New South Wales due to stamp duty was not strong; however the ACT government should be cautious.
“People are attracted to the ACT for a number of reasons; however we’ve got to be mindful that we’re just over the border (from New South Wales) and it’s not very far away, so people can make those decisions to move over the border into new developments in Yass or Queanbeyan or Goulburn… we’ll have to be mindful of that”, he said.
Industry experts have also suggested that the ACT cannot continue to rely on a transaction based tax as a base revenue. This is due to an increasing shortage of land in the territory.
Dr Christopher Peters, chief executive of ACT & Region Chamber of Commerce and Industry, said, “The ACT budget has a significant amount of income that comes from the sale of land and the ACT is running out of land. Current estimates say it’ll last about 20 years.”
With experts agreeing that stamp duty must undergo change, what changes are the ACT Labor and Liberal parties proposing?
The ACT Labor party has outlined a plan to abolish stamp duty in the ACT over a 20 year period. The budget shortfall would then be made up for by adjusting rate prices in Canberra and the more expensive properties would shoulder much of the cost.
The ACT Liberal party targeted first home buyers with its plan. Opposition Leader, Zed Seselja promised an immediate 50% cut to stamp duty for first home buyers.
While most experts have backed Labor’s plan to phase out stamp duty, John Miller of Master Builders Association sees positives in the Liberal’s plan.
“In most instances where we’ve seen stimulus activity, there’s always been a response by those seeking to enter the market. From our perspective, anything that drives some economic activity, particular in the building and construction sector, which is renowned for its contribution to the economy, is a good thing,” he said.
Craig Bright of the Real Estate Institute is in favour of phasing out stamp duty, however. He is concerned that Labor’s model may disadvantage those who have already paid stamp duty.
“If you look at it essentially, people who have paid stamp duty are going to then pay it again over a period of time. So our argument is yes, you should shift the tax base, but not as another property tax”, he said.
There is also the concern that a rise in rates via the Labor model will result in people paying higher rents in what is already and expensive rental market.
Labor has said that this will not be a problem for many Canberrans as under the new rates structure, a lot of people will actually pay less in rates as high end properties will shoulder much of the cost.
The Liberal’s plan has also come under fire from some sectors of the market. Some are worried that the plan to halve stamp duty for first home buyers may lead to a budget shortfall, which could affect some community services.
Neil Evans of the Housing Industry Association welcomes a cut in stamp duty, but says the cuts should go further.
“I would like to see 50% off (the level of stamp duty for) all new homes, not just first home buyers,” he said.
With both the Labor and Liberal parties having put forward proposed changes to stamp duty in the ACT, change is just around the corner.