There has been no shortage of commentary on tax over the past few months. Be it politicians or members of the real estate community, everyone has been keen to add their two cents on the contentious issue. Treasurer Joe Hockey was often at the centre of these discussions, but his latest comments may just spur the change that home buyers have been waiting for.
Treasurer foreshadows change
Those buying property in Australia often bring up the high level of taxation on real estate transactions. Stamp duty has become the bane of the public’s existence, with many commentators emphasising that it has become a cash cow for state and territory governments across the country.
In a speech made at the PricewaterhouseCoopers Tax Reform Forum in Melbourne, Mr Hockey highlighted what many people have been saying for some time: Stamp duty is one of the most inefficient taxes.
He noted that state and territory governments have become increasingly reliant on these levies for revenue. In fact, Mr Hockey revealed that around a third of state tax income is from these inefficient taxes.
“Surely it is not beyond the capacity of us as a country to have a sensible, mature debate about long term tax reform more generally,” Mr Hockey said.
To put his words in perspective, recent research from the Housing Industry Association (HIA) shows that home buyers have bore the brunt of these taxes. The winter editions of Stamp Duty Watch reflects that purchasers in New South Wales faced a $22,490 stamp duty bill on a median priced dwelling in June 2015, which has caused total home loan repayments to rise.
HIA Senior Economist Shane Garrett highlighted that abolishing this tax and replacing it with broad-based levies would have tangible benefits for Australians’ standard of living and the nation’s economic wellbeing.
“Stamp duty bills have increased particularly sharply in NSW and Victoria since late last year,” Mr Garrett said.
Pressure is building
Fortunately, momentum seems to be building against stamp duty. The Property Council of Australia said that Mr Hockey’s speech has hit the nail on the head in terms of public opinion. A report from Newgate Research, commissioned by the Property Council, found that Australians are in favour of creating a fairer and simpler tax regime.
Of those surveyed, 78 per cent agreed that stamp duty is more unfair than a range of other levies, including personal tax, GST and corporate tax. Some 68 per cent of Australians have been personally affected by stamp duty, and 54 per cent believed that it has made it harder for them to afford a home.
“National tax reform needs to replace our most distortionary taxes with more efficient revenue sources,” Property Council Chief Executive Ken Morrison said.
Mr Hockey’s speech might be a sign of things to come, which is no doubt something that home buyers will be waiting on eagerly. In the mean time, for help working out how much you can afford to borrow, our lending professionals at Customs Bank are on hand to guide you through the whole home financing process.