There is a lot of talk at present about a proposed increase in the GST as part of our Tax Reform agenda. It seems the more the GST option is socialised, the more comfortable the States are becoming, with some even advocating for it.
Unfortunately in this latest round of discussions there has been little mention of whether Stamp Duty would be scrapped if a GST rise was to occur.
The Federal Government itself has conceded that Stamp Duty is an inhibiter to growth in its Options Paper. So it might be time to remind those having these discussions - particularly the State Treasurers, that removal of Stamp Duty needs to be factored into any rebalancing that is to occur between State and Federal revenues.
Few things have as detrimental an impact as stamp duty on household finances, according to the Housing Industry Association. The cost of stamp duty is equivalent to almost four months’ worth of earnings, with stamp duty causing mortgage repayments to increase by $1,165 per year, or $34,955 over a 30- year loan term. “The cost of stamp duty has a significant negative multiplier effect causing a downward financial spiral for households,” explained HIA Senior Economist, Shane Garrett. “As state governments rely more and more on revenue from stamp duty, they have been blinded to the obvious consequences of these costs have on prospective first home buyers. Last week’s Productivity Commission report also noted the huge disincentive that stamp duty places on older households wishing to downsize,” concluded Shane Garrett.