Calls to abolish a 'tax on a tax'

While the state government stands to reap a total of $1.8 billion this financial year from stamp duty on property conveyances, around $30 million of the windfall is estimated to be sourced from levying stamp duty on a GST-inclusive basis.

The ‘double tax’ take is not only hitting property conveyances but also motor vehicle transfers and insurance premiums.

On the conveyance front, all stamp duties are levied on new property prices or values inclusive of GST, with existing property exempt.

Real Estate Institute of Western Australia president Rob Druitt said the practice of charging stamp duty on a GST-inclusive basis must be abolished as it was highly inequitable in its current form.

“Clearly it wasn’t meant to be this way…the state government is taking advantage of the system,” Mr Druitt said.

A large number of submissions to the current State Tax Review are understood to have proposed its abolishment, favouring the application of stamp duty on the true economic value of transactions.

Many cited the practice as inequitable because it favoured the purchase of existing property and those property purchasers who were acquiring property on a GST-free basis, by claiming the purchase as a ‘going concern’ or under the federal ‘margin scheme’.

State Tax Review reference group chair Jonathan Ilbery said it was possible the public would continue to see the practice as a ‘tax on tax’ if it were not abolished, but the task was not as easy as it seemed.

“There are technical problems associated with removing it as it could create potential inequities working the other way…It would be administratively easier and more equitable to lower all the stamp duties by a percentage, rather than taking the GST out,” Mr Ilbery said.

An interim report released by the State Tax Review late last year stated tax relief could be more transparently and provided through stamp duty rate reductions and threshold increases. 

“A key question for the State Tax Review is how much weight should be attached to the adverse community perceptions that would remain,” the report said.

Mr Ilbery is expected to make his final budget recommendations to the government in early April.