Stamp duty vs land tax – Q & A

2020, 07 16 - e73b68f94646840206ae8c93bad6fe705a1ff1d3-16x9-x0y44w707h397

There has been a lot of talk lately, all around the country, about the need to abolish stamp duty in order to boost the property market and revive the economy that has copped a battering since the COVID-19 pandemic began.

The Real Estate Institute of WA (REIWA) is one industry body that is lobbying the state government to abolish the tax and replace it with a broad-based land tax system charged as an annual fee. They have called stamp duty as a tax “inefficient and unfair”.

So how would a new land tax work? And what would it mean for people who already own property? REIWA President Damian Collins answers the most frequently asked questions.

Q. How would an annual land tax fee be calculated?
A. There are a number of ways the annual fee could be calculated. A good way to ensure the tax is fair to everyone would be to link the amount owing to the value of the land. This would also allow the government to increase their revenue as land values increase. In other words, the greater the value of the property, the higher the tax.

Q. What about those who have already bought a property and have paid stamp duty. Will they have to pay land tax every year too?
A. That will depend on the model adopted by the government. One model suggested is that existing owners would be exempt from land tax until they purchase another property. They would than have the option to pay the stamp duty upfront or pay land tax as an ongoing annual fee.

Q. Will first homebuyers still qualify for exemptions like they currently do, some paying no stamp duty at all?
A. The government must make that decision. Overall, the annual fee is more manageable than a lump sum that is typically added to the home loan, accruing interest over the term of the loan. First homebuyers would actually be better off under a land tax system even without concessions, but we’d still welcome additional help to get them onto the property ladder sooner.

Q. What about seniors when downsizing?
A. There are currently no exemptions on stamp duty for seniors who are downsizing. One proposal would be to give them a choice between the lump sum stamp duty payment or an annual land tax payment, much like for first homebuyers. Again we would welcome further assistance for seniors too.

Q. Property investors currently have to pay a land tax as well as stamp duty on the purchase. What would change for them, if anything?
A. The investor would no longer have to pay a large lump sum upfront but the land tax would increase. However an annual fee would likely be preferred by most investors over a large upfront cost. It could be the difference for many between investing in property and not taking that step.


Post by ShelMarkblog 16 Jul 2020 0