NSW considers replacing stamp duty and WA should do the same to boost jobs

Findings from the New South Wales inquiry into federal financial relations has been released outlining 15 recommendations, including setting out a roadmap to realign financial relations between the Commonwealth and state and territory governments.

Of significant note was the recommendation to replace stamp duty with a broad-based land tax, an aspect the Real Estate Institute of Western Australia has been advocating for within our own state for a long time.

Stamp duty is described in the report as an “unfair and damaging tax” and is the wrong tax for rebuilding the state governments’ capability to deliver for their citizens – clearly this also applies to WA.

The replacement of stamp duty with a land tax system, or alternative annual fee, will provide a more equitable approach to funding government services.

Numerous studies have shown that removing stamp duty will create a significant economic uplift and create thousands of additional jobs in the economy. There is simply no defence for the retention of this impost – the most damaging tax of all.

In particular, the report noted that many owner-occupiers in NSW have remained in the same property for at least 20 years, a trend which we have seen in WA as well. The significant cost of paying stamp duty up front has deterred people from being able to right-size to meet their lifestyle needs.

For a property worth $500,000 in WA, stamp duty is estimated to cost the buyer almost $18,000. With many buyers including this cost as part of their mortgage, this is a significant deterrent for many West Aussies looking to move home.

With a broad-based tax system, payments will be made over a longer period, allowing those who need to move the ability to do so. Having an opt-in model only on new transactions will mean those who have paid stamp duty are not unduly hit by the replacement tax.

Stamp duty is at a near record low for its share of State Government revenue, sitting at around four per cent of the total $31 billion in taxes, royalties and grants collected.

While COVID-19 has clearly impacted the state budget, our guaranteed share of GST and strong royalties from the mining sector mean now is the opportunity for the State Government to make real long-term tax reform.