THE State Government’s grand tax reform plans started with a whimper rather than a bang this week after several key initiatives were delayed.
While changes to land tax and payroll tax took effect as expected, on July 1, plans to abolish four different forms of stamp duty, covering leases, cheques, transfer of listed shares and life insurance policies, have been delayed.
The relevant legislation was only introduced to parliament last week and the changes will not take effect until some time following the passage and proclamation of that legislation.
The staggered implementation of the tax reforms is surprising, given the primacy placed by the State Government on the integrity of the overall package.
While the stamp duty reductions have been delayed, the Government is proceeding with a range of other tax measures and user-pays levies (see next article).
Two of the biggest hits will come from increased stamp duty on property conveyances and general insurance.
These increases, announced in the May budget, will raise an extra $160 million for the State treasury.
This followed the $400 million, or 23 per cent, increase in tax collections as a result of policy decisions in the State Government’s previous budgets, according to the Chamber of Commerce & Industry.
West Australians will pay an average of $1,793 in State taxes in the coming financial year, the second highest level on record.
The Government reckons this a good outcome because it has maintained WA’s ‘national tax competitiveness’.
Specifically, WA will continue to be the country’s third highest taxing State after NSW and Victoria (see table below).
The chamber had been concerned that WA was on the way to becoming the second highest taxing State in Australia.
That threat has abated, not because of tax restraint in WA but because the Bracks’ Government in Victoria has continued to lift its taxes.
Chamber economist Nicky Cusworth said these interstate comparisons understated the tax burden on WA businesses.
“From a business perspective, the picture is worse than it first appears,” she said.
“Other States earn more from gaming taxes so the proportion paid by business in WA would be higher than in other States.”
The chamber has commended government efforts to restrain spending growth – and therefore tax growth – but has called for tougher action.
“The stamp duty hikes are a consequence of the Government still not being tough enough on public sector spending and its inability to bring the health sector, in particular, under control,” the chamber said.
Opposition leader Colin Barnett said he suspected the re-routing of the Perth to Mandurah railway was largely to blame for this year’s tax hikes.
The WA Farmers Federation has also criticised the amount spent on “infrastructure that is not wealth generating”.
“Spending must be justified by the return and the Government’s city centric focus just is not stacking up,” WAFarmers president Colin Nicholl said.
On the revenue side of the equation, Mr Barnett has been particularly critical of the payroll tax changes, which lift the minimum payroll tax rate to 6 per cent and lift the threshold to $750,000.
He said the changes would result in higher payroll tax bills for about 4,000 medium-sized businesses.
However the Government, with the support of the Chamber of Commerce & Industry and the Greens (WA), has argued that the overall benefits of the package outweigh this cost.
Businesses with retiring staff will also be hit, since eligible termination payments will be included in the payroll tax base for the first time.
Another group that will be adversely affected is home buyers, who face a second successive large increase in conveyance duty.
People buying a $200,000 house in Perth will pay $7,280 in duty, an increase of $900 on last year.
WA now has one of the highest rates of stamp duty in Australia.
However, property buyers seem to be more interested in rising property values and low interest rates, judging by REIWA’s latest index of homebuyer confidence, which has risen to the highest level since the 1993-94 boom.
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