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if stamp duty abolish & replace by land tax

Discussion in 'Property Market Economics' started by samiam, 22nd Mar, 2016.

  1. samiam

    samiam Well-Known Member

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  2. samiam

    samiam Well-Known Member

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    and abolishing negative gearing will be detrimental to some
     
  3. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    from a revenue point of view it would be better to get annual payments out of tax payers rather than a 1 off payment.
     
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  4. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    One of the comments that came out of the recent GST increase debate was that whilst it would raise more revenue, there wasn't really a plan in place on how to spend that extra revenue appropirately. It really just led to a cycle of increasing tax revenue, government spending more, thus needing to increase taxes again...

    Land tax vs Stamp duty is likely to have a similar outcome. It will cost some people more, save some people a bit, but it doesn't create any real efficiencies in government spending. Adjusting the tax revenue has more potiential to make government less efficient.

    In my own memory as a business owner (and even as a tax payer for most of my adult life), there's often been points where the budget needs to be tightened, efficiencies need to be introduced. The cost of living has increased but wages haven't matched it. This is even more true in business where there's constant presure to grow and become more efficient or utlimately fail. Somehow government doesn't seem to be able to adopt the same measures.

    I'm not against tax reform, but I don't think that it's the solution to budget deficits. Governments need to be better investing to create more income, or they need to be looking within. What I tend to see is governments increasing spending, not so much increasing investment.

    This sort of reform without better direction is more likely to cost tax payers more in the long run, without any real tangible benefits.
     
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  5. Inov8ive

    Inov8ive Well-Known Member

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    There has been a really good report released today identifying the possibility of abolishing stamp duty and replacing it with a land tax. The $5250 a year tax that could change everything
    Those of us who have already paid SD on purchases would be exempt from land tax. Not sure if indefinitely or for a period. I think this is a great idea, it has been reported on before but I think that the idea is a very good one. SD is such an obstructive tax and very counter productive. I think I would be a backer of this initiative.
     
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  6. lewy89

    lewy89 Well-Known Member

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    Definitely interesting. I just read it before too. I know that for me, I would benefit from this scheme
     
  7. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    it is realiively difficult to buy a home because of the large upfront fees needed for stamp duty:

    "On a median priced Sydney home of $1,032,000, home buyers in NSW pay $42,250 in upfront stamp duty at present."

    That is a huge barrier to entry, especially for first home buyers. If this was spread out and not payable up front it would help.

    There are also disincentives for people to sell and buy another property because of the costs involved.

    Real estate agents would love this.
     
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  8. Inov8ive

    Inov8ive Well-Known Member

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    I think anyone with property would benefit but also FHB, retirees and anybody who lives a rather transient lifestyle
     
  9. Carrytrader

    Carrytrader Active Member

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    Land tax is also more efficient. If there is a cost in keeping derelic and unused spaces in cities then they could more redevelopment opportunities for better use of space.

    Case example
    No Cookies | Daily Telegraph
     
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  10. dabbler

    dabbler Well-Known Member

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    I do not like either, but would prefer a lump sum that can be borrowed rather than eating into poor cash flow forever more, and watch them jack it up when they want more, for whatever reason (buying votes for example)
     
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  11. samiam

    samiam Well-Known Member

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    yes all your positive cash will be slowly washed away..
    apartments may become more attractive for cash flow?
     
  12. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Dont forget you can borrow to pay land tax and land tax is deductible for investment properties.
     
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  13. wogitalia

    wogitalia Well-Known Member

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    This is absolutely a great move, I don't get the point of a deferral scheme in the article, it would really undermine one of the most positive parts of land tax, being that it forces more efficient use of land.

    It's absolutely the right approach, it's a more efficient tax, it increases the liquidity of housing which makes pricing more accurate and it actively discourages land hording (especially if scaled up for multiple properties) which should be something we're doing (even if it goes against the interests of this forum).

    It's a pipe dream though, state governments really don't cop much flak for stamp duty and land tax is hated by everyone (because it's so unavoidable) and realistically increasing efficiency with no financial gain has never been something governments care about and if they're doing it for financial gain it's a pretty good way to make it your final term (even if in 20 years you'd be lauded as one of the good governments...)
     
  14. VB King

    VB King Well-Known Member

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    Pretty Sh!tty idea if you've done your acquisition paid your stamp duties already and now up for a more broad based land tax.
    I think it's a fairer system ... But needs grandfathering ... Or those that have busted a gut over the last couple of years are going to be hit twice.
     
  15. Kangabanga

    Kangabanga Well-Known Member

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    So without stamp duty properties can now be more easily "traded" and speculated on since there is no big cost involved with "flipping" properties?
     
  16. Big Will

    Big Will Well-Known Member

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    Are they also going to introduce car tax instead of the stamp duty for them? If so I would hate to be a wrecking yard!

    [​IMG]

    Re cost of stamp duty being to high - 40k in 1M is 4%, you pay more tax buying a can of coke (in % terms) and will be even more if we follow the UK on its sugar tax!

    If you cant afford the 40k cost to purchase a 1M property you should be buying a property at 900k then.

    Do I enjoy paying stamp duty, no but it is a cost of doing business. If they removed it guess what it would just increase the purchase price by 40k (on 1M) as people now have another 40k to spend :O.

    Also if they did change it to an ongoing cost well either less investors in the market (less rental properties) which will push rents up (or rents will go up as investors will push the cost onto the tentant...End user always pay).

    Also with how bad households are at saving how would they go about finding another ~$6,000 just to hold their house? This is on top of the 1k for rates plus ~20k mortgage (4.5% of average loan 431k ~ 20k) + 1k insurance + 50k for living (Australian spending habits | ASIC's MoneySmart - Couple with kids) or now 78k a year just to live.

    This would require a person to have an income of $110,000 to support this and I haven't included other expenses people have like insurance, personal/cc debts or private health cover.

    Further to this the average Australia is only saving $427 per month (~5k p.a.) you want to now charge them 6k p.a. for land tax instead of stamp duty... Please

    Source: How do your savings compare with the average Australian? | MyWealth Commonwealth Bank
     
  17. Vanillascent

    Vanillascent Well-Known Member

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    I might write an article on this topic for a law review journal. I've been thinking about writing one for a while and I think this topic has a lot of merit - an analysis looking at the pros and cons etc. Will let you all know if it ever gets published.
     
  18. Gockie

    Gockie I'm an ISTP-A female, so I might be a bit quirky! Premium Member

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    But (with my investor's cap on).... surely personally it would be better that the $40k goes to you if you are the seller rather than it going into the hands of the government?
     
  19. Kangabanga

    Kangabanga Well-Known Member

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    dun worry guys, as I said before, its all just TALK. That's what canberra is good at most of the time. Just look at how long it took for APRA to intervene and for ATO to take over from FIRB.

    And before you know it, its double dissolution time and we could very well have a different PM (dare I say a "shorter" one? :p ) and Treasurer come July.

    Just look at the number of PMs we have had in recent times, starting to become a joke.

    Looking more like aussies favor quantity over quality and its costing tax payers big time.
     
    Last edited: 29th Mar, 2016
  20. Big Will

    Big Will Well-Known Member

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    Sorry for the delay went away for Easter, also I cant be bothered to investigate so my source isn't great but you will get the idea :).

    So where will the government make up this shortfall? NSW forecast was for 6.1B in stamp duty (Source: http://www.smh.com.au/nsw/property-...elected-baird-government-20150402-1mdliq.html) Lets call it 20B nationally who is going to fund this shortfall?

    Also it would increase the wealth to those who have property already compared to those who have none increasing the wealth gap here for Australia.