Land taxes may be coming, what will it mean for retirees?

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The COVID-19 pandemic has presented many opportunities to change the status quo, and one of the biggest reforms governments are looking at is scrapping stamp duty in favour of a land tax.

Stamp duty is a much-reviled tax on property purchases, which most people agree is horribly inefficient and penalises new home buyers unnecessarily. Unfortunately, state governments rely on this revenue to generate revenue and it is incredibly hard to change the revenue base.

However, the latest crisis has resulted in both the NSW and Victorian governments seriously looking at scrapping the ineffective tax and replacing it with a land tax levied annually on all home owners.

If this passes, what will it mean for retirees?

Firstly, the good news. Stamp duty is one of the leading barriers to older Australians downsizing in retirement.

What is the point of selling the family home only to lose a significant portion of the household capital to pay for the stamp duty on a smaller residence?

With stamp duty removed we can expect it to be much more rewarding for older Australians to sell their larger properties and downsize into something more affordable, and reap the reward from the capital invested in their home.

It is also likely that new homebuyers, who will be interested in buying these properties, will still be willing to bid up to the maximum amount they are able to afford, which means house prices may increase with no stamp duty to be paid on the purchase, which could mean more money in the pockets of those looking to downsize.

For those retirees who do not want to downsize, or have already downsized, the prospects are not as bright.

A land tax will be a new annual tax paid by all homeowners. This is an expense that those who have already retired would not have budgeted for and will have to pay. And it won’t be cheap; with many predictions suggesting the land tax may be more expensive than current council rates.

Making the proposed land tax even more unfair is the fact that current homeowners have already paid stamp duty on their property, so will in effect be paying the price twice, compared to new homebuyers.

The people hardest hit by the changes will be those who are asset rich but income poor, and most retirees fit squarely into that category.

The ACT is already in the process of replacing stamp duty with a land tax, but it is making the change gradually to limit the damage done. The ACT reforms are taking 20 years to be implemented and stamp duty won’t be completely abolished until 2032.

As yet there is not enough detail on how the Victorian and NSW state governments are planning to phase in these changes, but it is hoped that the retirees will be looked after by ‘grandfathering’ any changes so that those who already own a house stay under the old rules until they buy a new house.

There are also suggestions of allowing people to opt in or out of the land tax system, giving people the option of paying a large up-front stamp duty bill or allowing them to pay a few thousand dollars each year based on the value of the land.

What do you think of the proposals to scrap stamp duty and introduce a land tax? Do you think it will hurt retirees?

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Written by Ben

87 Comments

Total Comments: 87
  1. 0
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    Any foundation economics text book will inform that land taxes are good taxes – they are efficient, difficult to avoid, consistent and help ensure the economic potential of the land is realised. A lot of people will hate them for the consequences of those very same reasons – the ability to pay – unless there is compensation for increased tax hit. Fun times.

  2. 0
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    All in favour of it, so long as there is, as mentioned no ‘double dipping’, if you have already paid stamp duty on your property you are exempt until you purchase again.

  3. 0
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    Don’t know the details re landtax compared to stamp duty + ongoing council rates so cannot comment it this stage and as mentioned by Farside, it should be grandfathered for those who have already paid stamp duty and to apply only to new purchases.
    Retirees can then compare the two costs if they decide to sell and buy another property.

  4. 0
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    No stamp duty, no land tax, no fuel tax..just increase the GST on everything..easy..

    • 0
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      Just put a “Sur-Charge” on ANY financial transaction and abandon EVERY other TAX.
      Just think how many public servants this would release to do some productive work!!!
      AND, it would ensure the FatCat Corporations would pay their share of taxes as they – at this stage i think – cannot escape this mechanism

    • 0
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      I would like to see GST simplified with no exemptions. The argument against increasing GST is that it disproportionately affects low income households, though there would be room for increasing benefits to offset GST increases.

      There is a lot to be said for a tax on revenue and financial transactions; these would undoubtedly be passed onto customers as a cost of doing business but it would ensure corporations not paying corporate income tax paid some taxes.

    • 0
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      NO increase in GST!!!
      We were duped when it originally was foisted on us. It was supposed to replace stamp duty!!
      Now they are suggesting another tax to get rid of stamp duty?

      GST is a 10% slug on our economy. Increasing it just makes business that much harder, and encourages a bigger black economy. its like driving with the handbrake on.

      A smart lawyer could start a petition against the new land tax on established properties, as we can’t be taxed twice. It works for the Governments mates using negative gearing, so why tax US twice?
      The reason they are considering this is because stamp duty is a one-off. A land tax is ongoing…

    • 0
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      have said for over 12 months raise the gst to 12.5%…now this is being mooted. We are one of the lowest in the world re gst…..the average is 11% as far as I am aware. I think we should raise it and broaden it as well; all this spending has to be paid for one way or another.

    • 0
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      Why should we raise the GST. John Howard said it would stay at 10% and not be raised ever. He said “everything” we purchase increases in its price year by year so that automatically means the GST at 10% is always increasing anyway. Why just because our GST charge is 10% and considered to be one of the lowest is it necessary to follow suit and raise it in line with other nations. Leave it as it is, governments get enough share out of it now and in the future. Land tax every year instead of stamp duty up front needs a lot more information given to the public before it is worthy of being commented on. Be assured most changes will always be in favour of the government, not the land owner.

  5. 0
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    Seems like good and fair idea to me.

  6. 0
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    Agree with “NO FREE LUNCH”. We should not have to pay Land Tax as we have already paid Stamp Duty when we purchased. OK if we decide to move to another property then I agree with the proposal. As retirees on a Pension it will make it very difficult to make these new payments. After all we have paid all taxes during our working lives.

    • 0
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      Young people paying off very expensive homes while trying to raise families will find it harder.

      We can stay home and not spend anything else much to pay a few thousand extra a year. Eat bake beans and so on. The young have kids at school and can’t afford childcare and insurances right now so an extra tax will really hurt them.

  7. 0
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    “What do you think of the proposals to scrap stamp duty and introduce a land tax? Do you think it will hurt retirees?”

    Is there a proposal? My understanding as regards NSW is that the possibility was discussed by the media and rejected by the state government. Assuming that a future state government might widen the already imposed land tax, I agree that grandfathering will stop those who have already paid stamp duty from being penalised twice. That in itself raises an interesting dilemma; some first home purchasers were/are exempt from stamp duty so would they be exempt from a widened land tax?

    Retirees would be badly disadvantaged, especially those on just an age pension. Some councils have been withholding rates which will be collected once a property is disposed of and unless a state government is prepared to allow this concession, it may be difficult for some home owners to meet the additional cost. As has been discussed in this forum many times, there are modest family homes in sought after areas that are worth in excess of $1M and a tax is levied on the value of a property.

    • 0
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      Time for property prices to collapse I think. It’s too big a bit of money for the greedy to not want at it.
      We rejected reverse mortgages so this is their next idea. Priceless.

      If they just got off their butts and used all the brainpower to create wealth instead of trying to steal it Australia would be a far better place.

  8. 0
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    What is council rates, if it’s not land tax. How much do they think is ‘under the mattress’.?

    • 0
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      Council rates are to pay for the things for which council’s are responsible, e.g.rubbish collection.
      Land tax will be levied by the State’s. Different imposition for different purposes and both are necessary.
      It is probably a long overdue reform provided it is grandfathered.

    • 0
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      Tanker, council rates are also based on land value, or land and dwelling value, and depends on the efficiency of each council. If it was based on services, then all rates within a council would be the same, but bigger, better houses are charged more. Same with water rates, 1 toilet is cheaper than 2 toilets in a house. It is not taxed just on water usage.

    • 0
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      Tanker – grandfathering means “I have mine now let the others pay their dues”. Think about that. If it is coming even stay at homes for ever should pay it not just the ones that have to move. Only fair to everyone.

    • 0
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      Mogo, the original concept of Land Tax, as I understand it, is that the land can earn a certain amount, – growing wheat, whatever, and that a portion determined by the Bully Boy, (Lord) of that land, was to be paid to the bully boyy and then a proportion to the King, who owned/claimed all of the land by right of conquest.

      This percentage was determined by the said bully boy, and those who overstepped were occasionally killed by their own Peasants.
      Rome raised this to a new art form by taxing more than the land could produce, thus causing all farmers on marginal land to have to leave, or be imprisoned for non payment of taxes, -this single act of Gross stupidity was the cause of the fall of the Roman Empire, (not the lead lining of the Aquifers, although that could be argued to be part of the problem because that poisoning may have led to the passing of that final death stroke to the empire, – whatever, the overtaxing of land has always been the main cause of overthrow of the Bully boys.

      Now we have a funny situation, Land with a house on it, is worth more than it can produce, – the house itself produces very little, – particularly a smaller house in the suburbs, but can be valued at a million dollars, produces virtually nothing.

      This is a perpetuation of an old, dead, bad, hierarchical systems, so it doesn’t work.

      What a modern Democratic country has is Ownership of the Land, By the People.

      To put that into modern Land ownership parlance is the challenge.

      To do it fairly despite the new Bully Boys of the Multibillionaires, is an even bigger challenge, – but we have grown, us human beings, since then, – it is doable, – that is what we must hold to our hearts, – it is doable.

      That our modern system is based on the overthrow of the old bully boys is something the Multibillionaires don’t accept, – greed never accepts curtailment, despite it destroys every civilisation within which it is allowed to dominate, – we must not allow it to dominate.!!

      It is time to look back on the Magna Carta, to look at where we have gone and at our base, and to think about where we are going.

      This is the job of the old, – to think and assimilate, to see the problems and the mistakes, to realise that the next Generation needs guidance, and to realise we have to be worthy to earn the respect of the next generation.

  9. 0
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    One of the taxes that was meant to go when GST came in was stamp duty (a regressive tax) the other bad tax is payroll tax – think about that one – government taxes a business more for employing more – what a disincentive. However the original GST was a flat tax on everything but politics got in the way so GST was limited so States kept some taxes to overcome perceived revenue shortfalls.
    We should revisit GST and have a flat tax on everything.
    The potential issue with land tax is that many people who have lived in same house for years may now incur a new tax.
    Perhaps it is time for all governments to. focus on core functions and reduce spending on non essential items. We could all list millions of dollars of those.

    • 0
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      Agree. Impose GST on everything and compensate appropriate people. This will still raise more than land tax according to John Hewson.

    • 0
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      Agree. Especially with increasing the GST and cover all purchases. Allow each state to keep a minimum of 80% 0f the revenue collected in their state.
      I also think company tax should be similar to the GST a simple 1.5% on turnover. The GST takes care of capex. and the government can introduce exemptions for large investments in infrastructure for mines and other areas of infrastructure required to stat up NEW projects.

    • 0
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      Compensate appropriate people? Can never happen! There will always be people who are seriously hurt by an increase in the cost of living who don’t get any compensation. GST transfers the burden of tax from the rich to the poor. If you think the poor should carry the rich man’s tax burden, then sure, vote for increased GST – and for increased hardship and unfairness. But then, perhaps you are rich and greedy?

  10. 0
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    I will go to prison before I pay a land tax unless I’m repaid in full, the total amount of stamp duty on property that I have purchased until now!

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