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A new Queensland government is now in place. For how long is anyone’s guess.
Let’s hope that the dust settles quickly & Queensland Labor gets a half decent chance to show us their minerals.
One thing that would do wonders – plus would take some guts – would be much needed property tax reform.
And that’s an opportunity the new Queensland government now has.
With fewer people moving from interstate, Queensland needs more reasons to encourage its residents to remain & more new folk to come.
One state – South Australia – is making strides in the right direction, calling for a property tax review & community input.
At present our stamp duty system stops certain property owners from moving – local movers, young families with children needing bigger housing, older residents wanting to downsize, and more expensive property owners wanting to purchase, for example – and this negatively impacts the number of local sales.
It also has a negative impact on new housing construction, restricting the amount of potential owner-resident targeted building.
We also believe that removing stamps on property transactions would help smooth out the peaks & troughs strongly associated with the property sales & construction cycle.
In short, our current stamp duty levies discourage households from moving to their preferred/ideal form & size of housing.
This is a highly inefficient & inequitable tax that encourages an inefficient use of the housing stock.
And as a major foundation for state government budgets, stamp duty is an intrinsically volatile source.
New South Wales, for example, is currently riding on the back of Sydney’s property boom & rising prices.
This upturn has seen stamp duty receipts lift by over 50% over the last 18 months to $5.3 billion for the year to January.
That’s some serious dough indeed.
But when the merry-go-round slows – and it always does – so will the flow of stamp duty funds to government coffers.
Our reading of the tea leaves suggests that post this cycle’s peak (which is very likely to be artificially boosted during 2015 & potentially extended into calendar 2016, due to falling interest rates), the drop off in both sales volumes & generic prices will be more like a crash than a taper.
So, too, will tumble state government tax receipts.
This regressive tax should, for mine, be replaced with a land tax levied annually on all properties. Or at least, it should be paid by the seller & not the purchaser.
South Australia sees the virtues of a broad-based land tax as being efficient because “there is a fixed amount of land & the tax cannot be avoided by shifting the location of land.” In other words, everyone pays, including down the line, tenants, too.
Among considerations under review in South Australia, stamp duty would be eliminated – so no large upfront cost at purchase – and replaced with an annual tax.
It’s not a bad thought, Premier Palaszczuk.
Yes, Queensland does have lower stamp duties than most other states/territories.
For example, based on a $500,000 owner-resident purchase, the stamp duty payable in Queensland is $8,750; whist in New South Wales a similar transaction would attract a $17,990 transfer fee.
A million dollar, again owner-resident, dwelling purchase in Queensland is taxed $31,000 on transfer; in New South Wales it is $40,490.
Of course, investors pay higher stamp duties & first home buyers, less & in some instances, nothing at all.
Yet, this lower Queensland rate isn’t an excuse to raise stamp duty.
Please Annastacia, don’t take the low road.
Instead, change the way property is taxed in Queensland.
The average Queensland dwelling – worth close to $405,000 according to Queensland Treasury – should be taxed (if you ask me) around $1,500 per year.
A broad-based sliding tax scale should be implemented according to property value, & whilst I am against differentiating by profile (i.e. investors paying more than owner-residents), the Labor Party, given their sensitivities, might think otherwise. This would be much more palatable if land tax, as it is currently applied in Queensland, is also removed.
So for the sake of argument, let’s tax Queensland property investors on average for a $405,000 median priced dwelling, say, $2,500 per year.
Regardless of the tax scales implemented, taxing property this way – via a broad-based tax – will get you more money into the state government kitty than the current practice of slogging property sales largely via stamp duty.
Let’s do some simple maths.
I stress this is ‘back of the envelope stuff’, but it does illustrate my point.
There were 127,000 settled residential transactions across Queensland last year.
When factoring in the proportion of sales made to each buyer group, about $1.2 billion should have been collected in stamp duties across Queensland during fiscal 2014. But to be safe, let’s call it $1.5 billion.
Now, there are 1.9 million private residences in Queensland, two thirds of which are held by owner-residents & a third (give or take) retained by investors.
Using our average suggested annual property tariffs – being $1,500 for owner-residents & $2,500 for investors – we estimate that Queensland’s economy could be pulling $3.5 billion each year from its residential property base.
And this amount of monies would not only be constant, but would grow as more houses are built across the state.
Such a broad-based land tax should be used to help to cover infrastructure costs & thus encourage more infrastructure investment, more land release & more new homes coming to the market.
Reform – equitable reform – does not come without its headaches.
Instigating any sort of change & dealing with those who have recently purchased, for example, & paid stamp duty, or others, like retirees, who may not have the funds to easily pay new taxes – requires innovative & well thought out solutions.
Congratulations to South Australia for looking at the process & starting down the road to equitable responses.
Queensland needs a competitive property advantage.
Despite all the spin about how great it is to live here, less people are taking us up on the offer. Fewer still are moving to a more suitable local residence. Stamp duties are part of the reason why.
So here you go, Queensland Labor – now’s your chance – the ball’s in your court.
From Michael Matusik –
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