• It’s time to review our state tax system


    Author: REIWA President Damian Collins

    It’s Time To Review Our State Tax System | REIWA

    In the lead up to the WA Mid-Year Budget review next month, REIWA is once again appealing to the WA Government to commit to undertaking a state tax review. This review should assess the viability and financial implications of shifting to a broad-based land tax system that ultimately removes stamp duty.

    Phasing out stamp duty has been an important agenda for the Institute for some time now. A state tax review would enable the WA Government to seriously look at ways of ensuring future revenue streams are more sustainable and that well-acknowledged inefficient taxes, like stamp duty, are reformed, while also ensuring a more reliable revenue stream for the Government.

    While we welcome the Government’s short term actions, such as the 75 per cent stamp duty rebate for off-the-plan purchases, the focus must now be long-term reforms that improve housing affordability for all West Australians.

    It’s well known that the single biggest hurdle for home owners entering or moving within the property market is the financial barrier of stamp duty. In the current system, if a family saves $50,000 for a home deposit and is looking to buy a home at the current median house price of $495,000, $17,765 of that deposit will go towards stamp duty.

    When you factor in the Lenders Mortgage Insurance cost of $16,010, the hardworking family has now lost almost all of their deposit, requiring them to take out a mortgage worth close to 95 per cent of the property value.

    From a state revenue perspective, the issue with stamp duty is that it is at the mercy of the real estate cycle. In the last six years, transactional activity in WA has dropped from over 71,000 in 2013 to less than 41,000 in 2018, the lowest the state has seen since 1990 and these numbers have only continued to fall in 2019.

    A move towards a broad-based land tax system would spread the cost of property taxes across many years (instead of in one lump sum), meaning the state’s fiscal position would not be as adversely impacted by fluctuations in transactional activity as it is now.

    Keeping tax reform front and centre of our local agenda is key to achieving a competitive real estate environment and improving housing affordability for West Australians. Now is the time for WA to lead the other states in introducing significant property tax reforms.

    Find out more on the different initiatives REIWA is advocating for which we believe will help boost the economy.