The hot discussion in business and real estate circles this week has been reports that new findings show most South Australians want Stamp Duty abolished.
An Advertiser article, Stamp duty: two-thirds want it scrapped, many support GST increase, carried news of the poll conducted by the Property Council nationally.
It follows coverage of our State Government beginning its phasing out of Stamp Duty on the sale of business properties, which we’ve written about here: South Australian State Budget 2015: A conveyancer’s review in relation to property.
However, I don’t think it’s time to be popping champagne corks just yet. Here’s why.
What the Property Council found?
According to the Property Council of Australia, 72 per cent of us in South Australia believe we should end Stamp Duty on property purchases, which is similar to views held nationwide.
And, furthermore, just under half of us would be willing to see the GST increase from 10 per cent to 12.5 percent to fund the change.
It is this latter half of the equation that makes me think we are still a long way from Stamp Duty reform because governments are generally too nervous to change GST settings.
We will need governments at State and Federal levels, willing to engage in debate about tax reform so that alternative funding streams can be achieved.
Why Stamp Duty removal would be economically healthy
There are a couple of reasons I would like to see the abolition of Stamp Duty on the purchase of homes.
Firstly, at a purely selfish level, our business would grow because I believe the change would remove a heavy barrier stopping people from upgrading or downsizing properties, which means more work for us as conveyancers.
However, from a community perspective, our economy would benefit from increased activity due to all the flow on effects when families move homes.
The reason I would forecast more activity due to the abolition of Stamp Duty is because it would remove a large cost from an already costly transaction.
For example, it costs approximately 2-3 per cent of the sale price of an existing property in selling fees and approximately 3-5 per cent of a purchase price in purchasing fees just to sell which is a substantial barrier to property “change-over”.
We know from our work with clients around South Australia that these costs result in many people holding onto properties they don’t like, even staying in areas they don’t like, because it is too expensive to move. Remove or drastically reduce Stamp Duty, and more property owners would be motivated to move.
As I mentioned previously, in reality I think it will be a long way down the track before this happens because governments will need to secure alternative funding streams and nobody likes hearing about new or increased taxes!!