The South Australian Government has today launched a discussion paper on the state’s taxation system, calling for interested parties to make submissions.
While the discussion paper makes no recommendations, one tax reform idea put forward is to abolish stamp duty on property transactions (conveyance duty) and replace it with a broad-based property tax of around $1,200 per annum for a median valued home of $410,000.
Conveyance duty (stamp duty on the transfer of real property) is currently levied during property transactions. For a $410,000 dwelling, the purchaser would pay $11,330 plus 5.00% on the excess making a total of $16,830. The Reserve Bank of Australia indicates the median length of tenure is 10 years, hence stamp duty equates roughly to $1,700 a year ignoring compounding, inflation and borrowing costs. For shorter term tenures, a broad-based land tax is favourable, but it could negatively impact longer term owners.
The South Australian Government indicates its objectives for tax reform is to provide enough revenue to deliver high quality services, to encourage entrepreneurship, investment and job creation, to collect revenue as efficiently as possible and to be as stable and predictable as possible.
Conveyance duty is considered a relatively inefficient tax in that effects the decision to buy and sell property, be it trade up or down size. It makes up a significant portion of the transaction costs on a property. Land tax, on the other hand, is considered an efficient tax base as the tax cannot be avoided and will broadly apply to all land including the principal place of residence.
From the South Australian State Government’s view point, conveyance duty makes up a significant 22 per cent of total tax revenue “but it is also highly volatile (annual growth has ranged from negative 20 per cent to positive 42 per cent)” dependant upon the currently irrational property market. As it is a tax on property transactions as well as values, a slow market can significantly impact revenues. This is best illustrated in 2008-09 during the Global Financial Crisis (GFC) as the state’s property market tried to correct before the Federal government intervened with the first home owners’ boost that Treasury reports was designed to bring forward demand and prevent the collapse of the housing market. The report notes conveyance duty collapsed 20% at the time and I’m sure the government is keen to avoid it this time around.
Outside of getting the reforms implemented in time, the real problem at hand is transition mechanisms and time-frames. As recent purchasers have forked out a small fortune on stamp duty, it would be unfair to overnight abolish stamp duty and bring in a broad-based land tax. Proposals under current consideration is to make the broad-based land tax effective from the purchase date of a new property transaction – potentially delaying a wide introduction or to provide credits for recent buyers. The latter makes the most sense if the government is striving for a stable and predictable tax revenue stream.
» Tax Review in South Australia – Government of South Australia, 11th February 2015.
Is there a fear at the political level that housing turn over is about to slow rapidly?
Will this be like the “once off” Emergency Services Levy, which is now annual, and has recently risen upto 400% YOY for residential property and >2500% for commercial property?
Governments at all levels are desperate for cash. And this is BEFORE the housing bust.
The Australian way of life as we know it is fast approaching termination. Pity less than 3% of the population will understand how it happened, why it happened, and even worse, how to stop it happening again.
what an utter disgrace! this idea shows the contempt govt has for the working man. It is outrageous enough that we pay a “fine” of 10,000+ on the purchase of a lower level home, but now they decide that a one off generous payment to the govt isn’t good enough, and it should be an ongoing contribution? So then you would be paying another $1700 per year, on top of you council rates? Sure bring it on, bleed us dry, we cant be far away form mass protest Greek style?
This is another fine example of why Australia has become a total shit hole. I certainly wont be retiring here, there are so many other places int he world where living is cheaper, and the govt is much more organised.
This is my personal view, subject to criticism if anyone thinks inappropriate.
The historical housing bubble in Australia, as well as in South Australia, has so far sucked most buyers and speculators, leaving slim chance of future speculation or self-buyers before the big crash.
In another word, the government has harvested most in the past decades in terms of stamp duty. Now realizing that the stamp duty is less and less reliable revenue, the government has to change the rule of taxation into another way in its favour.
The levy of land tax over principal and investment properties can broaden the tax base and provide government more reliable income than stamp duty.
However, the land tax significantly increases the holding costs of the investors/speculators, which will cool down the bubble in a way. The side effect would be with the principal residence, where people (especially the old ones) may not afford in the long run together with the other skyrocketing living costs.
In general, the land tax will deflate the housing bubble in the disadvantage of the speculators and be painful to people living in their homes. As the rule maker, the government would not lose, no matter the housing market goes up or down.
A bit slow those South Australians. Queensland already has a land tax for property holdings over $600,000
https://www.osr.qld.gov.au/land-tax/about-land-tax/land-tax-rates.shtml
I’m waiting for the day when the government consider re-introducing a death tax as well, so people who work hard all their lives to own a PPR have 50% of the equity seized on their exit from this morally corrupt society.
The citizens who only own one home should be exempt from this type of money grabbing.
The greedy one’s, who think hoarding property is the easiest path to wealth, I have no concern for them and would be happy to let karma deal them a bad hand!
This is somewhat off topic but as someone looking at the Australian economy from afar could any of you gentlemen please explain where all the money from the mining boom went?
Ha ha, the government is gonna come after property owners for their pound of flesh. $25 a week tax just for having a house, and watch as that quadruples in the next few years.
Oh, and as for your ‘investment’ properties, they are going to get taxed so hard you’ll barely break even on them.
What a nice little trap this is that the governments of Australia have sewn.
@6
Absolutely.
Three words: Middle Class Welfare
Something like 80% of Australian Households pay $0.00 net tax: What that means is all the hand outs from the government completely offset the income tax they pay.
Want a baby? Here have five grand
Kids go to school? Here have an education bonus
Got solar panels? Here have Xcents above market rate for your excess
Free school
Free health
Part a & part b family tax payments
Low income tax breaks/ off sets
The list goes on, and on, and on.
But if you’re above average, don’t have kids, well, the government is out for you.
The will be much wailing and gnashing of teeth as the budget continues it’s incredibly rapid decline, and cannot continue to support entitled Aussies the way they have been for the last 20 years.
Where did the money from the mining boom go? Back to average families which then spent it with China, Apple and Samsung.
@6 Answer: Home loans and negative gearing – oh and all the foreign corporations who actually own the mines – and of course Gina Reinhardt’s pocket – and tax breaks for the super-rich. I dunno, I’m not an ‘expert’, but I know we haven’t seen any of it. Trickle-down economics my arse!
@Damian most of the mining companies are foreign owned. And I suppose a lot of the money our workers got went into buying property. Now all the property values in mining towns are getting crushed:
http://www.theaustralian.com.au/business/property/from-13m-to-360k-the-bust-hits-home/story-fniz9vg9-1227213872001?nk=969b3bead9cd22cc689ceb2678aa4a85
@6.
Well we got big bills ya know. 20 billion we need for some sub marines. We need oh 100 of those new fan dangle f35 fighters and all dat.
Aussie is the best country in the world for making money I reckon. Best ever!. But that’s it. Your a dumb ass if u spend it here.
best policy. Make u r cash and live it up large elsewhere, coz these fat a holes in govt got this game sorted. And there are plenty of peons to pump their property bubble.
So basically, the average hard working man got sweet FA of the Mining Pie……same old story. So what in your humble opinions is going to happen with Australia over the next few years? Seems to me that you’ll continue to have high property prices (thanks to Chinese buyers) but high unemployment or underemployment with no manufacturing worth talking about. How the hell does that work? I’m only asking because I was thinking of giving up a well paid job as an Engineer here in Ireland and heading down under but all i’m hearing is doom and gloom from Australia. FYI, things are picking up in IRELAND/UK after some pretty depression years. The Australian Govt realize what’ll happen if the property market crashes. It’ll destroy the economy for decades. That’s why i believe they will try everything to keep it propped up. This will include increasing income tax.
@12. I would avoid moving to Australia. We have two of the world’s largest bubbles. The commodity ‘supercycle’/bubble has just burst, and this bubble helped prop up the housing asset bubble to become one of the world’s largest. I don’t think I need to explain what will happen next.
The commodity supercycle caused dutch disease shutting down manufacturing. We are a high cost economy with the highest labour rates in the OECD. We can’t compete in the international market place. Even if we could get these down, no one is going to restart manufacturing here. Manufacturing is gone long term.
Now the government will have to work what to do with high unemployment. We can try to keep cutting rates to prevent the housing bubble bursting, but at the end of the day if you don’t have a job, you won’t be able to service the mortgage. It doesn’t matter what interest rates are.
@12. I think the whole world will be turning down, not just Australia. And once again, to quote Martin Armstrong, “After 2015.75,the world economy will spiral into the worst depression in centuries.” If that is the case, the decision to live in Oz or Ireland is an easy one.
The system is a set up(rigged).Local dollar tanking 30% in past year.Bad luck if you wanted to take your wealth elsewhere.Meanwhile the cashed up overseas buyers get one third more bang for their buck.OZ is being shafted big time.They call it “changing the blood”.The workers here do not have the highest wages in the world.Maybe if your average includes the fat cats.Workers wages have been $20 per hour for 30 plus years.Our rulers seem to think that we have had it too good for too long.The slavery and the bullshit goes on and on.Great country even better people.All being exploited by the 1%.
If you think the challenge of a commodity super cycle and housing super bubble is not enough, Australia now has to contend with the the most incompetent leader of any industrialised democracy. This is the words of the Council on Foreign Relations, not mine.
It’s going to be hard to attract business investment to Australia when Abbott is at the helm.
This will never happen. IF they were serious they would have done it long ago. It is only a public relations stunt to quieten down increasing concerns. Governments have reports on just about anything ready on hand to present to the public when it is needed so politicians can present themselves as on top of the situation, but in fact they don’t know what they are doing. Don’t be fooled by such reports. Voters should demand actions not reports and be willing not to vote for them if required.
The property bubble in Sydney, just keeps getting bigger and bigger.
Just today, my friend’s late mothers home was sold at auction, and it fetched a massive price way over the reserve.
A house, up the road from where I live went for $960,000 and I live in South West Sydney, not exactly the most affluent part of Sydney.
All I can is that first home buyers (especially young home buyers), have got no hope in hell of ever buying a house in Sydney.
Forgive me for sounding like a broken record player here, but this massive property bubble makes no sense, the mining boom is over, manufacturing is on its knees, wages are going down, unemployment is rapidly rising.
When will this madness end?
@18
I can see a lot of young Australia’s giving up and staying at home with Mum and Dad forever…….or moving to countries with a cheaper cost of living, if they can get a job. $960,000 for a house is just crazy. It’s four walls and a roof for Gods sake. Sydney is just a landlords paradise as far as I can see. I never thought I’d see the day when I’d be much better off in Ireland than Australia. Globalisation is a crock of shit if you ask me.
http://www.abc.net.au/news/2015-02-12/vacant-sydney-offices-to-become-apartments/6089246?section=business
Bubble will always be ‘maintained’ unless Armstrong’s predicted happens. Record number of office space & shops lays vacant in/around Sydney & rising. Various white collars I spoke to, are worried about their ‘careers’. Peak asset inflation before sudden deflation kicks in along-with world events. Fools will be sucked in for sure.
I’m amazed this hasn’t gained more traction in the weekend press. It was reported late Friday afternoon, by coincidence or design. Most probably more wet lettuce leaves, but some surprising noises being made by the PM.
http://www.dailytelegraph.com.au/news/nsw/pm-tony-abbott-orders-treasury-squad-to-force-immediate-sales-on-foreign-property-investors/story-fni0cx12-1227219181011
All I can say is good luck catching them. Many of these purchases are being made through local proxies.
P.S. Loved the comment about investigating Julia Gillard’s sale in Altona. That’d make a real statement.
Taking a closer look at the Gillard sale it stinks beyond all recognition.
http://www.theage.com.au/victoria/julia-gillards-former-altona-home-now-a-shrine-20150114-12o3ry.html
‘Chinese mortgage broker Zheng Wang and his wife, Jian Wang, bought the three-bedroom brick house at auction in December, 2013, for $921,000 – about $250,000 more than its expected sale price.’
‘Daughter Stephanie Wang, who in 2003, at age 16, became one of the youngest-ever female International Baccalaureates, was cleared for a job with Ms Gillard’s ministerial office’
WOW. What’s going on there?
No point in going to Australia so…….I’d have to learn Chinese first
@14 Gavaroo
Have you actually ever been to Ireland?
I have lived both in Ireland and Australia.
Ireland in 2015 is booming with GDP figures over 5% growth last year.
The econic infrastructure there has been fixed through some tough decisions since 2008 and now the economy is showing the fruits. The people are resilient and hardworking.
Australia on the other hand is like an ostrich with its head in the sand. Hasn’t had a recession in 24 years and there’s a whole generation of people who’s idea of hardship is if there isn’t enough milk foam on their latte. Australia will not deal well with a recession and the Australian people will be slow to take the economic pain necessary to fix the impending financial and social disaster.
Nowhere is a nice place during a recession. Ireland is far better placed to deal with any further downturn and would be a far better place to be to weather the storm.
It’s Adelaide, so nothing will happen.
The blue-blood Liberal Party members in the Eastern suburbs will scream bloody murder about paying more tax.
The auto and parts industries will close. Unemployment will go through the roof. House prices will collapse in a domino effect starting from Elizabeth. The government’s credit rating will be downgraded. Once a second downgrade looms and everyone realises just how bad things are and that there’s no way out, only then will any change occur, and perhaps not even then.
Have fun, SA. It was nice growing up there, but you’re Australia’s Michigan.
Median house price of $410k… absurd! Let’s see how that holds up under 10+% official unemployment rates. Bloody glad I sold my house there last year (and shifted every cent from the sale into USD). I dodged a bullet.
Australia’s currency can’t drop low enough to make SA competitive at doing…, er…, anything actually.
@25 Rory.
Yes I have been to Ireland, but alas, when the Celtic Tiger was still a wee twinkle in the E.U.’s eye.
I couldn’t agree with you more with what you are saying, IF we were facing a recession. I think it is going to be more like a world wide depression, fiercer than a culchie full of poitin.
So, based off my belief, I would rather be positioned in a Sub-Tropical climate.
@ Rory,
All well and good other than Erie is intravenously connected to EU currency…
prepper
@Gavaroo
Everyone is diffferent and values different things in life. A sub tropical climate wouldnt be top of my list, but live and let live.
@Prepper
The Euro is in trouble alright but you could also say “All well and good other than Australia is intravenously connected to the Aussie Dollar”..lol
But I take your point because Ireland is dictated to by the ECB..
@25 Rory,
Lets not get too carried away with the “Booming” comment but things are certainly picking up in the UK/Ireland zone. The rest of Europe with the excepting of Germany is f*cked…..no doubt about it. Ireland still has a lot of social issues and massive debt hangovers from the “tiger days”, that will last for generations………..and the weather is crap. God i miss the Gold Coast
@29 Rory.
“A sub tropical climate wouldnt be top of my list”. Just out of curiosity, where would the top of your list be, when the SHTF?
When the SHTF I don’t want to be anywhere near Europe or the US I can tell you. I’m sticking with Australia.
Yes, things are going to get tough here, but top of my list is to buy a house on a lovely plot of land; make it as energy efficient and carbon neutral as I possibly can; grow stuff; run a part-time business from home; and maybe even partake in running a little restaurant somewhere near my oasis.
I’d stick with NSW though, probably up the coast from Sydney somewhere.
Wild horses couldn’t drag me back to London!
@31 Gavaroo
Top of my list would be to be around my extended family.
I have a young son with special needs.
@32 Rupert,
Sounds like a great plan. I see a lot of people downsizing and moving out of the major cities in the future.
@32
I think you’ve got it sorted there: Only thing is the govt are out for guys like you. Cost of water is a massive issue: I can’t believe they make you pay for what you catch and use: It’s pure abuse of the economic system.
This is how stupid the situation is getting: YOu maybe better off, being completely of the grid with massive solar, wind and other power generation, and then running water condensors rather than rely on nature for your water supply: Again, only politicians could f$%K something up in this way:
I wonder who’s paying all these mobs to blab that the GST needs to be risen….. Wouldn’t be the folk in Canberra would it? If GST rises to 15%, that will be the end of small business proper: As someone with a business, I can you my margin is 7%, I already pay the government more than I earn, while I supply all the capital and take all the risk: The government does NOTHING for guys like me except increase our blood pressure.
It’s a sad, sad situation we find ourselves in: Sadly I think less than 1 in 10 Aussies know how bad it is to get.
and on it goes,
http://thesovereigninvestor.com/gold/gold-repatriation-shows-concern-over-global-financial-crisis/
https://www.youtube.com/watch?v=KB5ljM3AJ2c
http://www.youtube.com/watch?v=qkWI5-2d7M0
https://www.youtube.com/watch?v=8hh-1V4nvGg&list=UU33GlTXP-QyP9BLKICTy2YA&index=3
prepper
Matty,
1 in 100,000. or closer to 1 in 1 mil.
prepper
All I see is a moderate correction in house prices, except Sydney and rising youth unemployment due to a tighter job market and the mining winddown. In my opinion, the Australian mining slowdown is the equivalent of Ireland loosing future investment in the pharmaceutical/biotech industry. It would destroy us altogether. Australia doesn’t seem to have any back up plan to compensate for the lost of this revenue stream, except increasing immigration in the hope it’ll keep property investment going. You also have to wonder about the quality of immigrants Oz is getting these days with all the visa loopholes available. When I got my Skilled Independant PR visa it was based on a stringent points system which required a high level Degree + relevant experience + english + age limit. You either made the grade or got rejected. Makes me wonder why I bothered.
Front page of the Age today..
Can’t be all low-income households. Takes a few dollars to power a bogan mansion I’d say. There has never been anything wrong with honest, hard work wiping tables at Westfield or being a kitchen hand. Still nobel positions. I say embrace the idea. It’s on way and many, many Australians will not make the transition. Too much pride centred around too much greed.
It was great when it was borrowed, now it needs paying and wages and opportunity is headed south. Intrest rates will rise. Incomes are simply inadequate.
All you gotta do is call your energy supplier. They WILL help. It’s called a low-income hardship scheme. But we all know about human pride and bullshit.
@38 Do you think the immigrants will still come when there is no jobs. I’ve been reading increasing number of articles in Bloomberg interviewing mining immigrants in Australia who have lost their jobs and are now returning home.
@38 Pete,
True. Many of the Mining immigrants are returning to PNG, New Zealand etc. They’ve made a few quid while the going was good. A couple of my mates have returned to Ireland recently from Queensland. Both worked as Engineers in the construction industry but said the work was drying up in Brisbane with some mechanical contractors going bust…..that is not a good sign and from my experience always precedes a major recession.
http://www.wtpartnership.com/project-news/australia-collapse-tier-1-mechanical-contractors-signato-stacey/
The only path forward as I see it is the following:
1) Increase Income Tax Bands
2) Invest in Tech Start-Ups
3) Reduce Corporation Tax from 30 to 15% to encourage FDI
4) Reduce Cost Base
5) Increase school and university participation rate in Science and Technology.
…..oh! and number
6) Provide funding and tax concessions for SME’s.
@ Damien
The point about dropping corporation tax is very true.
There is no external resistance in Australia to a low corporation tax rate like in Ireland (12.5%)
But Australia’s physical location in the world would be a hindrance to physical manufacturing being rebooted so best to concentrate on services where location doesn’t matter as much. I work in pharma / biotech and returned to Ireland recently. Australia has already a good scheme to gather stage 1 and 2 clinical trial biotech investment with tax breaks. More of these schemes are needed in Australia to get it back on track. Basically there will be a decade of economic reorganisation.
Dear friends, Just finished reading an article by Dr.David Pascoe BVSc Phd. “An open letter to the Australian people.” Below are some highlights. “Right now, all over inland Queensland and NSW, there is nothing but social and financial carnage on a scale that has never been witnessed in this nation. What is happening out there is little more than corporate terrorism; our own Australian people are being bullied, threatened and abused by both banks and mining companies until they are forced off their land. So we must ask; is this simply to move the people off their land and free it up for mining by foreign companies or make suddenly newly empty farms available for purchase by Chinese buyers? But here’s the thing; When these people are forced off their farms, they have nowhere to go. There are no refugee services waiting.Some are sleeping on the backs of trucks in swags. They camp out, shocked and broken and penniless-and they are living on weet bix and noodles. This is no longer the Australia we once knew, no longer our country, no longer our people, no longer the decent caring leaders we once remembered. Right now, the banks, the mining mates, the corrupt politicians and all the ‘mongrels in suits’ have won – and the Australian people don’t have a clue what has been done to them.
[Inserted by admin – a full copy of the letter is printed here : ‘I’ve never been more ashamed to be Australian in my life’: Vet pens emotive letter comparing banks to terrorists over treatment of drought-stricken farmers… now it’s gone viral – The Daily Mail (UK)]
@56.
Wait until that behaviour becomes main stream in the cities.
56andoverit-Unfortunately most of the people you mention voted for politicians that put them in the predicament they are in today. IF they should be complaining there is a place called Canberra-They can sit there complaining on how they voted for them. Maybe then I will feel sympathy for them and join them-until then they fully deserve the plight they are in.
The auction clearance rate in Sydney over the weekend has just gone Nuclear!.
9 more rate cuts until zirp.
Financial crisis = means = the money of the world’s population is sucked like by vampires….to the banksters pocket! Only the weapon of truth can “kill” the lie! Fractional reserve banking is the “fundation” of all evil and the main cause of our suffering.
I wonder what the real numbers are…
http://m.heraldsun.com.au/news/victoria/mortgage-foreclosures-force-thousands-out-of-their-homes/story-fni0fit3-1227234597151
I would like to congratulate the RBA and the government for their fine effort in taking us to the 23rd most indebted nation. More than Brazil, Chile & Indonesia at 213% of GDP. Keep reducing the interest rates and printing money and we may even get to number one. Well done.
http://www.zerohedge.com/news/2015-02-23/biggest-problem-facing-world-today-9-countries-have-debt-gdp-over-300
Jj-The figures are obviously not a reflection of the real truth-However, I agree it will get worse but many people will not feel sympathy for them as most are investment properties subsidized by generous tax concessions from the taxpayer, but now lost them to vested groups like banks because they got in over their heads with debt. I just hope none of them will bore us with their plight and hypocrisy in the future and how its all the banks fault. IF its someone they are looking to blame it is all the political parties and especially themselves for voting for them.
@50.
Yes, yes, we are 23rd or so. But here is the real problem.
Separate private and public debt.
Private debt, we are #1, with most of it ( at least >100% of GDP in RMBS – house mortgages ).
Then that leaves government debt which is low by international standards. BUT…. BUT…..
Look at the countries above us….. Point out those that have bailed out their banks from a housing collapse… Then point out those that are yet to have a housing collapse. This is the problem.
We are in a handful of countries that hasn’t had a housing bust, which means our government balance sheet hasn’t been trashed by a bank bail out…. But why is there still so much debt?????
When SHTF, and our bank bail outs do happen, we wont be far off the top of that chart at all. Scary, given our last pillar of strength in the economy is the finance sector: How do we approach the future? We need to be rebuilding the economy focused on exports, but instead we continue to hold business back with red tape, ever increasing wages, superannuation commitments and social decline.
Each week I fear more and more for the people of Australia: If we face a Japanese style melt down….. What will the average superannuation fund look like? 25 years on, the Nikkei is still only 1/4 of what it was: Check your super balance, divide it by four, and move 25 years into the future….. Not a pleasant thought is it?
http://www.abc.net.au/news/2015-02-20/santos-drilled-by-writedowns-posts-large-loss/6160210
http://www.theaustralian.com.au/business/mining-energy/hefty-job-cuts-flagged-as-santos-plunges-into-red/story-e6frg9df-1227233062953
http://www.theage.com.au/victoria/victoria-rail-industry-fears-job-losses-due-to-government-delay-in-rolling-stock-orders-20150223-13mfrb.html
http://www.abc.net.au/news/2015-02-20/anz-cuts-140-jobs-from-its-melbourne-sydney-offices/6159450
http://www.abc.net.au/news/2015-02-24/abc-cuts-250-jobs-in-response-to-budget-cuts/6257350
http://www.smh.com.au/nsw/youth-unemployment-hits-a-new-high-as-people-locked-out-of-workforce-20150220-13jiax.html
http://www.macrobusiness.com.au/2015/02/odey-mauls-australia/