Purchasers of the most expensive homes in Australia are hit with the fourth highest stamp duties on property purchases in the developed world, according to a new 25 country tax study conducted by UHY Haines Norton, the international accounting and consultancy network.
The report notes however that in Australia the tax varies widely with luxury homebuyers especially in Tasmania and Queensland faring much better than the ACT and the NT.
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UHY’s research shows, the international average cost of stamp duty and other compulsory property purchase fees for a USUS3.5 million property is 3.4% compared to 5.3% (average across all states) for Australia–the fourth highest major economy in the 25 nation study.
Dearer than Australia was India, Spain and the United Kingdom.
UHY’s study also highlights Australian property purchase taxes for median range properties are significantly higher than the international average. For properties costing USD$500,000, the property purchase tax in Australia ranks as eighth place but its 3.7% (average across states), compares to a 2.90% international average.
“Aside from making it harder to enter the home-owner market, higher property purchase taxes may discourage people from moving state for a new job, especially those with families who might reasonably expect to own their own property,” UHY Haines Norton indirect tax specialist partner, Dario Nazzari said.
“This effects the mobility of the labour market in Australia as it is not simply a case of selling in one market and buying in another. Even if employers agree to foot the bill, it adds a further overhead
and cost to Australia’s already high labour costs as highlighted in a recent UHY study on labour costs.
“In North America, which is renowned for its flexible and mobile labour market, property taxes are below 1% in the USA and no higher than 1.23% for median priced homes in Canada.
“Compare this to a rate around 4.8% in the Northern Territory and you can see one labour mobility impediment our labour market faces.“ said Mr Nazzari.
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Mr Nazzari says state governments have attempted to plug fiscal deficits with stamp duty in recent times.
“Stamp duty is an additional barrier to entry into the housing market and, as house prices soared, so did the additional stamp duty which needed to be paid at the time of purchase. This is somewhat of a paradox as it made it harder to enter the market and, as a consequence, cooled the housing market even further as activity slowed.
“The high level of taxes on property purchases can also make Australia an unattractive option to overseas investors as it adds further cost to any acquisition,” he said.
This article first appeared on Property Observer.