Chartered Accountants Australia and New Zealand and CPA Australia are supportive of a proposed move by the New South Wales (NSW) government to eventually do away with stamp duty and gradually adopt an annual property and land tax pegged on unimproved land value. Under this proposal, property buyers would have a choice to either pay stamp duty or opt to lock themselves and future owners of the property into paying the new tax.
The country’s top accounting bodies have however expressed concern over the lengthy transition period and how the state will manage the application of the three taxes – stamp duty, property tax, and land tax.
Both bodies do agree that switching to a property tax would make for a more stable revenue stream for government and result in a more efficient tax system. Dr Gary Pflugrath, CPA Australia’s executive general manager, has described stamp duty as volatile and inefficient. Although also appreciating the positive changes this change could bring, he has also voiced concern on the potentially long-term tax burden that property owners would have to endure.
CPA Australia has also cast some doubts on the suggestion that adopting a property tax would make housing more affordable at a time when land values are rising while earnings stagnate. CPA Australia has highlighted how NSW land values are rapidly increasing, suggesting that property taxes would similarly rise at a faster rate than the current slow earnings trend.
The Housing Industry Association (HIA) is also backing this shift towards land tax in NSW, calling stamp duty inefficient, inequitable, and punitive. HIA’s chief economist, Tim Reardon, said that households were being penalized through stamp duty when there was a need to change homes for such reasons as better access to health facilities, moving closer to study, and for employment. People were being discouraged from moving even when it was in their best interests to do so.
This move by NSW has inspired others to take a similar approach. The Victorian Chamber of Commerce and Industry (VCCI), has put forward a proposal also calling for the abolishment of stamp duty and the institution of a broad based land tax for property purchases.
According to the VCCI CEO, Paul Guerra, stamp duty was making it more expensive for young people to join the housing market. If implemented, the change would mean not just savings for first-time homebuyers, but also the sellers who would be protected from having to pay more than the stamp duty they already had.
Some experts have pointed out that such a change would cause a short-term decline in the state’s revenues. Guerra however indicated that Victoria was capable of filling the gap at a time when interest rates are at such low levels. He opined that with the new land tax, government coffers would regularise within the next six to eight years.