The Real Estate Institute of Western Australia (REIWA) has urged the State Government to commit to stamp duty reform in its 2021-22 Budget, given the state’s strong financial position.
REIWA claimed stamp duty has remained the biggest financial hurdle for Western Australians looking to buy property.
REIWA President Damian Collins said while stamp duty was an important revenue earner for the WA Government, the inefficient and inequitable tax was ultimately a handbrake on the economy.
“Stamp duty actively discourages home ownership and makes it significantly more difficult for people to move frequently,” Mr Collins said.
“Our state’s finances are enviable. We have navigated the challenges of COVID-19 relatively unscathed and are one of the only economies in the world thriving right now.
“If there was ever a time for the WA Government to implement bold reform to help alleviate housing affordability pressures on West Aussies, now is it.”
In its 2021-22 Pre-Budget Submission, REIWA called for the government to introduce four key areas of stamp duty reform to improve the efficiency and equity of the WA property market.
The introduction of a two-stream revenue collection method for stamp duty
REIWA recommended the WA Government introduce a two-stream revenue collection model for stamp duty, which would give purchasers the option to pay the tax upfront (as is currently the case) or opt for an ongoing annual fee, calculated at the purchase price of the property.
“Stamp duty adds a considerable amount of money to the savings required to purchase a home, as well as adding to the debt buyers take on, which adds thousands of extra dollars over the life of the loan,” Mr Collins explained.
“This additional cost is too big of a burden for many buyers, pushing their dream of home ownership out of reach.
“It also penalises those who move house more frequently. Often these people are simply moving for work and are unfairly burdened with a tax that has no relationship to any economic output.”
In a 2020 survey conducted by REIWA of more than 1000 people, 90 per cent of respondents said they considered stamp duty to be a significant barrier to home ownership.
Additionally, 60 per cent said they would opt for an ongoing annual fee if given the choice.
“Stamp duty in its current form is a huge pain point for WA buyers,” Mr Collins said.
“Reforming stamp duty by implementing a two-stream revenue collection method would remove one of the biggest financial hurdles buyers face and result in a significant productivity boost for our economy.”
Immediate $10,000 stamp duty relief for those aged 65 and over
REIWA also called for the WA Government to immediately provide a $10,000 stamp duty concession for all people aged over 65.
“Stamp duty prevents many seniors from right-sizing into more suitable accommodation,” Mr Collins said.
“Many either struggle to raise the upfront costs or are deterred from spending a large sum to move home.”
“Targeted stamp duty relief for seniors would assist with these upfront costs and help them to right-size into more suitable accommodation, which would free-up housing stock and assist with mobility across the whole market.”
The ‘off-the-plan’ stamp duty rebate
With one-third of all unit purchases last year estimated to be off-the-plan, REIWA made the recommendation to lock in the stamp duty rebate for off-the-plan purchases, which is due to expire in October this year.
“It is vital that the off-the-plan stamp duty rebate becomes a permanent feature of WA’s property tax system,” Mr Collins said.
“Incentivising the purchase of multi-unit dwellings will ensure ongoing construction work while reducing urban sprawl and encouraging infill development.
“The current 75 per cent stamp duty rebate for off-the-plan construction apartments has been essential in ensuring an ongoing pipeline of projects. We believe that without this ongoing incentive, the demand for apartments will soften, impacting the steady supply of diverse housing and the creation of jobs for West Australians.”
The removal of stamp duty on the purchase of small businesses
Victoria, New South Wales, Tasmania, South Australia and the Australian Capital Territory have all removed stamp duty on the purchase of small businesses. REIWA has urged the WA Government to follow the same path.
“Whilst overall WA has been incredibly lucky throughout the COVID-19 pandemic, those who have been hit hardest by lockdowns and restrictions have been small businesses,” Mr Collins said.
“They need our support more than ever, so it’s essential the WA Government does not stand in the way and that they implement policies that boost productivity.
“As one of the only places in the country that still collects stamp duty on business assets, we are creating a business environment that is less competitive than the eastern states and placing a cost burden on small businesses which discourages productivity and the entrepreneurial spirit.
“With more people making career changes than ever before, we need to pave the way for those who want to have a go.”