State Government has announced plans to abolish three stamp duties worth $924 million over five years, abolishing stamp duty on mortgages, hiring transactions and non-real business property.
State Government has announced plans to abolish three stamp duties worth $924million over five years, abolishing stamp duty on mortgages, hiring transactions and non-real business property.
Part of the government's State Tax Review the changes fall well short of the calls from business, with the WA Chamber of Commerce and Industry saying it was "astounding and unacceptable" to claim these as tax cuts because their abolition was part of the WA's GST obligations.
The state government said it had now cut 11 taxes since 2001, denying the tax cuts were anything to do with its agreement with the federal government at the introduction of the GST.
Treasurer Eric Ripper said the three taxes being abolished were listed for 'review only' under the GST agreement with the Commonwealth. WA had already fully honoured its commitments to abolish taxes under the agreement, he maintained.
"The decision to abolish the taxes came after consideration of public submissions to the State Tax Review, early feedback from the State Tax Review Reference Group, and weighing up the need to provide essential services and infrastructure," the Treasurer said.
"This work showed clear support for abolishing these three taxes.
"It is only the beginning of the process with the State Tax Review's interim report to be released for public comment at the time of the 2006-07 Budget."
Premier Alan Carpenter said that, combined with previous tax relief measures, the total annual relief provided to WA was $690 million in 2006-07.
Under the proposal stamp duty on mortgages would be halved on July 1 this year, and completely abolished by July 2008.
"The saving for borrowers will be about $65million in the first year, and $150million per year from 2008-09," Mr Carpenter said.
"This means that a homebuyer taking out a $300,000 mortgage will save $750 and a small business borrowing $500,000 will save $2,000 in duty.
Stamp duty on prorpety conveyances and transfers remains untouched. It was budgeted to raise $1.48 billion this financial year and $1.25 billion the following financial year.
Payroll tax, which is expected to raise $1.33 billion this financial year and $1.38 billion next year has also not been cut despite business calls for a reduction from levels that among the hihest in Australia.
"Also, from January 1, 2007, stamp duty on hiring transactions will be completely abolished," the Premier said.
"The savings for businesses such as video and DVD stores, party hire proprietors, car hire companies and household and construction equipment hire firms will be in the order of $37million per year. These savings are expected to flow to consumers."
The Government has also committed to abolish stamp duty on the sale of 'non-real' business property such as goodwill, intellectual property and statutory licences, from July 1, 2010.
"Savings to the community from abolishing duty on 'non real' business property are estimated at $90million per year in today's dollars," Mr Carpenter said.
Public comment on the Interim Report will enable the State Tax Review to make its recommendations on reform of the State tax system for the next five years.
State taxes abolished since 2001
Financial Institutions Duty (FID) July 2001
Stamp Duty on listed shares July 2001
Stamp Duty on cheques January 2004
Stamp Duty on unlisted shares January 2004
Stamp Duty on leases January 2004
Stamp Duty on life insurance July 2004
Stamp Duty on workers comp. Insurance July 2004
Bank Accounts Debit Tax (BAD) July 2005
Stamp Duty on mortgages July 2006 cut by 50 per cent gone
by July 2008
Stamp Duty on hire of goods January 2007
Stamp Duty on non-real conveyances July 2010
The abolition of stamp duty on mortgages; stamp duty hire of goods; and stamp duty on non real conveyances builds on the Government's previous substantial tax cuts. All up, tax relief measures implemented by the Government since 2004-05 will deliver an estimated annual benefit to WA taxpayers of about $690million in 2006-07 rising to $1.1billion in 2010-11.
Below are announcements on the issue from the Housing Industry Association and CCIWA:
HIA welcomes Stamp Duty abolition for homebuyers
The Housing Industry Association has praised the Western Australian Government's decision to abolish two taxes which will have a direct impact on the building and construction industry.
HIA WA Executive Director John Dastlik said "the removal of stamp duty on mortgages and on hiring transactions will be a welcome relief for the WA industry which, in common with other areas of Australia, has been feeling the effects of reduced housing affordability."
Mr Dastlik said the halving of stamp duty on mortgages on July 1 this year will give a speedy fillip to the industry particularly for first home buyers. Abolition will be completed in July 2008.
Stamp duty on hiring transactions - a significant boost for hirers of construction equipment- will be completely abolished on January 1, 2007.
"Mortgage stamp duty abolition will mean that a homebuyer taking out a $300,000 mortgage will save about $750," he said.
"These moves are timely considering the present strength of the Western Australian economy, and should ensure the building and construction industry will be able to play its part in the continuing prosperity of all the state's citizens well into the future."
"However, HIA remains convinced that there needs to be further adjustments including a substantial increase in the first home owners' grant, increases to stamp duty threshold limits for first home buyers buying land or house and land packages, the removal of stamp duty on GST inclusive costs and the double dipping of stamp duty on new house and land package contracts in order to ensure that this very important sector of the market continues to be able to enter the housing market." he said.
As an example two of the major first home buyer land estates in WA,, which are both State Government land joint ventures, have virtually no land ( if any) available below the stamp duty threshold limit of $150000 for first home buyers buying land, below which no stamp duty is paid
Below is an announcement from CCIWA:
Status quo on state taxes
not acceptable: CCI
Statement by CCI Chief Executive John Langoulant
The Premier's statement today that there will be no tax relief in the coming budget other than the staged abolition of GST-related state taxes is both astounding and unacceptable.
The mammoth surplus the Government is expecting this year - probably approaching $2 billion - is clear evidence that West Australians are overtaxed and are entitled to expect the Budget will include some correction in the main state tax rates.
The announcement makes a nonsense of the State Tax Review, the first stage of which was designed to provide stakeholder input on the tax relief options for the Budget, due to be brought down on May 11.
The abolition in WA of mortgage duty, and stamp duty on hire contracts and non-real business conveyances, was obligatory and cannot be presented by the State as mainstream tax relief.
Those imposts were replaced five years ago by the GST, in effect, and the State Government was overdue to give them up under the terms of the GST inter-governmental agreement. The removal of these taxes will do nothing more than redress WA's competitive disadvantage in those areas.
The Premier's chief argument for stopping there does not hold water. The Government has not exercised sufficient control over general spending to be able to say its capacity to return some of the huge surplus has been overtaken by demand for government services and infrastructure.
Spending has ballooned an average 6.2 per cent a year since Labor took office. It was up more than 9 per cent last year and a repeat of that is on the cards for 2005-06. There is plenty of scope for growth in demand for services to be met through expenditure savings and efficiencies.
Public infrastructure is mostly funded through borrowings, not current revenue. In any event, the Government has no substantive plan for new infrastructure and it could not responsibly construct much more in the short term than is in the current program - even if there was such a plan.
Business urges the Government to reconsider its position. It has the capacity to immediately deliver at least $300 million in tax cuts, probably more.
WA has one of the least competitive tax regimes of all the states, so not only is tax relief the right thing to do in the circumstances, it is also the smart thing to do if the Government wants to catch up with the other states and ensure investment interest in WA is maintained.
