Depending on which way you look at it, the prospect of buying a new home can either be exciting or extremely stressful. The imposition of having to pay stamp duty means that homebuyers are either settling for lower-valued homes so that they can get into the market sooner by taking the stamp duty component out of their house deposit, or having to push back their purchase plans significantly for further saving.
Stamp duty is a major source of tax revenue for states and territories. In the 2015/16 financial year across Australia, $20 billion was collected in stamp duty. This is the highest percentage of total tax intake by states and territories in over a decade. The ACT is the only state or territory where stamp duty tax as a portion of the average house price has fallen, according to a new report release by Housing Industry Australia (HIA). The ACT’s stamp duty proportion of the median dwelling price has dropped from 3.6 per cent in November 2012 to 2.9 per cent in November 2017. This is the second-lowest percentage in the country, following Queensland’s 1.6 per cent.
The ACT Government’s dependence on stamp duty is also the lowest in the country, recording a tax revenue of 18.2 per cent in the 2015/16 financial year. In 2012, the ACT Government developed an initiative to phase out stamp duty over a 20-year period, it was viewed by then Treasurer and current Chief Minister, Andrew Barr, that the ‘inefficient’ tax was discouraging people moving Canberra to take up job opportunities and therefore negatively impacting the growth of the Canberra economy.
In February of this year, Mr Barr called for all jurisdictions to abolish stamp duty, in the hope that the government’s wider 20-year plan to abolish stamp duty on all home transactions would be fast-tracked for first home buyers. This however may lead to the first home owners grant (FHOG) also being abolished. Numerous economists across the country have long argued that the FHOG grant led to the inflation of property prices for first home owners.
This push to abolish stamp duty across all jurisdictions is to be commended from the perspective of promoting better outcomes in the local housing market. It also has the important benefit of insulating the ACT government’s revenue streams from unfavourable changes in housing market conditions locally.