The state government has responded to calls from the housing sector in its pre-election budger by reducing the cost of property transaction, increasing thresholds which will cut stamp duty on a median priced home by more than 15 per cent.
The state government has responded to calls from the housing sector in its pre-election budger by reducing the cost of property transaction, increasing thresholds which will cut stamp duty on a median priced home by more than 15 per cent.
Despite the cuts the state still anticipates a $1.85 billion surplus in the coming financial year as booming iron ore prices keep the revenue up, though the forecast surplus is expected to be below that of the current year.
Recurrent spending is set to rise 7.7 per cent and capital works will be a massive $26 billion over four years.
Business lobby groups will be disappointed to see that changes to payroll tax amount to compliance improvements, touted to save around $164 million a year.
State treasurer Eric Ripper said treasury expected the benchmark iron ore price to increase by 67 per cent in 2008/09 to $134 per tonne before falling to $101 per tonne in 2011-12 , when global iron ore supply is expected to exceed demand. Five years ago, the iron ore price was just $30 per tonne.
Among the property-linked tax measures is the abolition of mortgage duty, increasing the land tax minimum to $300,000, reducing marginal land tax rates and a reduction in the Metropolitan Regional Improvement Tax.
The land and property tax changes were welcomed by all the major housing industry lobby groups which had been calling for the state to rethink its taxing of property as the boom poured revenues into government coffers.
However, the Real Estate Institure of Western Australia reserved some criticism of the timing, suggesting that the implementation should not be delayed till July 1.
"The housing market is very slow at the moment, and now that buyers know stamp duty will be
cheaper in July most will hold off for another seven weeks," REIWA president Rob Druitt said in a statement.
The Housing Industry Association welcomed the changes which it said would cut stamp duties rates by an average of 5 per cent.
The HIA said that while these measures are welcomed, the state treasurer's announcement of a new regulatory review process to be introduced, which will require a Cost Benefit Analysis to be completed on all new regulatory proposals, has the potential to also significantly improve housing affordability.
The Property Council said the changes would translate to around $220 million a year in savings on property transactions, or around $1 billion over four years.
"A new concessional rate of stamp duty for residential property transfers representing a reduction 13.5 per cent for a $200,000 purchase to 5.7 per cent for a $1 million purchase," the Property Council said in a statement.
"The concession applies to principle places of residence, rental properties, & land to be built on within five years.
"In combination with the aforementioned 5 per cent reduction in stamp duty for all property transactions, the total stamp duty reduction for purchasers of residential property is around 15 per cent or $3,000 for most residential transactions."
Below are releases from the HIA, REIWA and Property Council:
The Housing Industry Association (HIA) today welcomed Treasurer Eric Ripper's housing affordability measures contained in the 2008/09 state budget.
The threshold for the calculation of stamp duty (applicable from 1July 2008) will increase by as much as per 50 per cent and the stamp duty rate will reduce on average by 5 per cent.
These measures together with:
1. the abolition of mortgage duty (average savings of $300);
2. land tax amendments including the minimum threshold limit moving to $300,000 before land tax is paid plus a reduction in marginal land tax rates; and
3. a reduction in the Metropolitan Regional Improvement Tax from 0.18 to 0.15 per cent.
will assist in improving the housing affordability in the state.
HIA Executive Director for WA, John Dastlik, said the stamp duty measures alone will lead to a 15.2 per cent reduction in stamp duty paid on a median priced Perth home of $457,000, this is a $2,828 saving.
"The concessional rates of stamp duty, applicable only to residential property, will apply for the first time in Australia to rental properties as well as principle places of residence. It will also apply to land where a residential development is commenced within 5 years," said Mr Dastlik.
While these measures are welcomed, the Treasurer's announcement of a new regulatory review process to be introduced, which will require a Cost Benefit Analysis to be completed on all new regulatory proposals, has the potential to also significantly improve housing affordability.
HIA has been lobbying the State Government on this issue for some time and its introduction recognises HIA's concerns on the impost of regulation.
"A number of new regulations have assisted in the decline of housing affordability. Today's announcement that promises a system of checks and balances is welcomed. However, the devil will be in the detail and HIA looks forward to working with Government in reviewing regulatory impacts on new house construction and land development," said John Dastlik.
Below is a release from the Property Council:
Today's 2008-09 State Budget includes a range of welcome tax relief measures for the property sector in Western Australia amounting to a saving of $224 million in 2008-09 and $1.05 billion over the next four years. The tax relief package is in line with the Property Council's pre-Budget submission. The main details of the tax relief measures include:
5% reduction in real estate conveyance stamp duty for all property transactions.
A new concessional rate of stamp duty for residential property transfers representing a reduction 13.5% for a $200,000 purchase to 5.7% for a $1,000,000 purchase. The concession applies to principle places of residence, rental properties, & land to be built on within 5 years. In combination with the aforementioned 5% reduction in stamp duty for all property transactions, the total stamp duty reduction for purchasers of residential property is around 15% or $3,000 for most residential transactions.
An increase in the tax-free threshold for land tax to $300,000.
A 33% reduction in the lowest marginal land tax rates (applying to properties valued up to $2.2 million).
An average increase of 13% in all thresholds for land tax, which delivers savings across the board.
A 17% reduction in the MRIT (Metropolitan Regional Improvement Tax) rate.
The tax relief measures detailed above and announced in today's Budget, will apply from 1 July 2008.
Below is a release from REIWA:
The Real Estate Institute of Western Australia today welcomed the stamp duty changes announced
in the state budget, but has called on the Treasurer to implement the tax cut immediately.
REIWA President, Rob Druitt, said the delay in implementation of the reform until 1 July would stall
an already sluggish market.
"The housing market is very slow at the moment, and now that buyers know stamp duty will be
cheaper in July most will hold off for another seven weeks," Mr Druitt said.
Mr Druitt said the reform was long overdue and REIWA is delighted that the government had finally
heard the calls from the real estate industry and from home buyers about the need to deliver on
meaningful property tax reform.
"Stamp duty thresholds have not been properly adjusted for 26 years. This failure by government
has seen bracket creep push more than 90 per cent of home sales into the top two tax brackets,"
Mr Druitt said.
Currently stamp duty payable on a median priced home is $18,500, and represents around 4 per
cent of the total house price.
After 1 July, the changes announced today will see stamp duty on a median priced home drop to
$15,700, a reduction of $2,800.
This will reduce the percentage of stamp duty as a portion of the median house price to 3.4 per
cent.
Mr Druitt said while the reduction is very welcome, stamp duty in WA still remains high, having
significantly increased from the 1.5 per cent of the house price in 1982 when the current thresholds
were first introduced.
On the flip-side, Mr Druitt said the government's decision to extend the new concessional tax rates
to include rental property is an important acknowledgement of the role that private rental housing
plays in our community in responding to the shortage of accommodation.
Mr Druitt also said the reduction in land tax for those holding rental properties may also provide
some small relief to the pressure on rents, as this initiative will marginally reduce holding costs for
landlords.
