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Replacing stamp duty with land tax

#1 User is offline   Bam 

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Posted 02 February 2013 - 11:44 AM

Time to stamp out inefficient duties - the case for replacing stamp duty on property sales with a land tax

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Stamp duty has long been the bane of first home buyers, but could the writing finally be on the wall? Michael Janda takes a closer look at the archaic, inefficient and onerous tax, and explains why it needs to go.

The article presents a compelling argument for state governments replacing stamp duty with annual land taxes that overall raise about the same amount of revenue.
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#2 User is offline   Bam 

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Posted 02 February 2013 - 12:02 PM

The biggest problem with replacing stamp duty with land tax is the transitional arrangements. In particular, if you've paid stamp duty on your property recently, you'll feel like being taxed twice if you then have to start paying land tax. And rightly so.

There are various ways to alleviate this problem. The ACT are replacing stamp duty with land tax gradually over 20 years.

Here's my idea for alleviating this problem.

Treat the stamp duty paid on the property by the current owners as an up-front payment of land tax. This amount is not indexed to inflation. Deduct the future land tax liabilities from this amount. As long as the old stamp duty remains, the property remains exempt from land tax. Land tax is only payable once the stamp duty is used up in this way. If the property is sold with outstanding stamp duty on it, the remaining stamp duty is refunded to the vendors, who would then start paying land tax on any new property. Alternatively, the amount is not refunded but can be transferred to a new property.

Stamp duty can also remain, but only as a modest charge such as a flat $50 property transfer charge to cover the administrative costs of registering the change to the property title.
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This post has been edited by Bam: 02 February 2013 - 12:04 PM

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