Multinational firm PricewaterhouseCoopers says letting property purchasers to decide whether to pay stamp duties upfront or land tax in smaller instalments could help with housing affordability and mobility.
The firm has done modelling and found that the average householder in Sydney could save $10,000 off the life of their 45 year-old home loan if they opted to pay land tax instead of stamp duty.
There would also be benefits for the economy as a whole as stamp duty acts as a disincentive for downsizing and relocation.
Swapping stamp duty for land taxes has support from some in the federal government, and PwC partner Paul Abbey says it’s hard to find an easy solution because the stamp duty system provided a good source of income to the states.
PwC says the best way around this is for the states to scrutinise land tax revenue through the bond market.
Under this proposal, a state government would issue a bond for the sum instead of receiving stamp duties up front.
For around the first 20 years of the switch the states wouldn’t lose any revenue but as things pushed out to around the 40-year mark the states would start losing revenue to the tune of $7.5 billion in total.
“To a certain extent we wonder whether it’s revenue the states can afford because they’re living in budget largess because of benefits of stamp duty on enhanced property prices,” Mr Abbey told Australian Financial Review.
“After all, tamp duty is the only tax Australians borrow to pre-pay and then spend the rest of their lives paying off.”