Every Aussie To Pay 3% Annual Housing Levy

Every income-earning Australian between the age of 20 and 60 could be expected to pay an annual ‘housing levy’ which equates to 3 percent of their income.

The biggest cause of Australia’s housing challenges are blockages created by poor policies, as opposed to the nation’s ability to build homes. And I’m proposing to remove the biggest blockage – state governments charging less than 5 percent of households with a $35 billion tax – and replace it with a significantly more efficient (Medicare-style) housing levy paid by almost everyone in the workforce.

What started out 158 years ago as a small ‘handling fee’ to cover the cost of administering a simple record-keeping task has become a toxic addiction that is a governmental version of opioids.

What started out 158 years ago as a small ‘handling fee’ to cover the cost of administering a simple record-keeping task has become a toxic addiction that is a governmental version of opioids.

State governments have sunken to depths of deep dependence on revenue from real estate transactions.

The stamp duty model is a draconian dream destroyer. It takes far too much money from so few people while simultaneously locking out millions of others from achieving life’s biggest goals.

The junkies in Parliament House of every state are feeding their addiction by charging between $30,000 to $120,000 for one to buy a piece of real estate that’s on their patch.

As is often the case with addicts, much harm is caused to those who they profess to care about most.

First home buyers, secondary buyers aspiring for a bigger or nicer home for their family, people who move town to pursue career and lifestyle opportunities, and property investors become the shrapnel in the slipstream of the countless lies told every day when pretending to care about housing needs.

The blatant state government substance abuse significantly restricts human mobility, it makes homeownership much harder to acquire, limits rental supply and it creates barriers for lifestyle enhancements. This is indisputable!

Genuine success stories of addicts going cold-turkey are incredibly rare, let alone when the addict has been on ‘the gear’ since way back in 1865.

Related article: Australian real estate 1903 to 2023

Intervention from a more powerful source is essential to save Australian society from the Smack Squad.

Stamp duty is the single biggest restraint on humans accomplishing their biggest dream at each stage of their adult life.

According to the most recent official data, this horrible addiction raked in a whopping $35.67 billion revenue in the 2022 financial year.

Stamp duty is each state and territory government’s greatest source of revenue, equivalent to $98 million per day and growing.

This tax policy is the greatest abuse of power.

They carry-on every week and pretend to have ‘care for tenants’, yet those tenants who put their head down and, over a chunk of time, save (say) $70,000 for a 10 percent deposit on an entry-level house, governments then knock them down a peg by saying “…don’t get too excited, I’m taking $30,000+ to fund our addiction.”

And 85 percent of the total annual stamp duty extortion are not first home buyers.

When a household needs to buy bigger digs to support their growing families and when those who’ve worked their way up the income ladder in pursuit of an opportunity to trade-up to a nicer home, the thugs take $50,000 to $80,000.

No government who truly cares about the changing housing needs at different stages of people’s lives would try to justify charging more than a few hundred dollars to cover their administration costs. Addicts, on the other hand…

Then there’s those everyday Aussies admirably trying to avoid becoming a drain on taxpayers in future years through putting the handout for an aged pension. It already costs $55 billion (and growing) each year to fund aged pensions for more than half of all Australians aged 65+ who have failed to accumulate a sufficient nest egg to become an independent adult.

Instead of encouraging people to set goals, to make sacrifices and to aim to not rely on others, the addicts instruct their hitmen to identify these aspirational people. They take them into a dark alley and belt the living suitcases out them with stamp duty, land tax, capital gains tax and a premium on city council rates.

Any society that has behaviours and policies which treat ‘investor’ as a dirty word is a society with a seriously bad attitude and very limited potential.

Who has the courage?

The damning impact of stamp duty on Australian society was widely acknowledged many decades ago. But junkies in each state lacked the ethical strength to move past their addiction.

Finally, in the late 1990s, a few courageous people discovered their moral compass and devised a plan to stop the substance abuse. Australia’s introduction of a Goods and Services Tax (GST) was touted as ‘the one tax to replace all existing taxes’.

Somehow, when GST was implemented in 2000, the addicts managed to escape Australia’s biggest ever attempt at national taxation efficiency. Back then, the 8 state and territory governments raised less than $5 billion from their annual real estate ‘handling fee’ policy.

The consequences of refusing to get off ‘the gear’ when they should have 23-years ago include that last year’s handling fee $35.7 billion.

For perspective, what these addicts raised in just 1-year from simply clipping real estate tickets is equivalent to what it cost to develop 100-years of airport infrastructure for Australia’s 10 largest cities. Opioids must be expensive!

Whether Liberal, Labor or the Greens, at federal, state or local government level… there is not one single bureaucrat in this big Land Down Under who deserves to ever be taken serious whenever they waffle on with “…helping Australia’s housing needs… blah blah [BS]”.

They all belong to a system of addiction that blocks millions of people from achieving their next property dream.

Based on the evidence from the last 20-years, approximately 500,000 real estate transactions occur in a typical year.

In 2021/22, with an abnormal amount of COVID-related stimulus, the all-time record was 590,000, still less than 5 percent of all households.

Such a low rate of housing turnover is reflective of the enormous barrier created by stamp duty.

Related article: How to unblock Australian housing

With 80 percent of the nation’s 26 million population residing in Australia’s 33 largest (out of 400) townships, the price of an entry-level house in 20 of those townships is currently between $700,000 and $1.2 million. On the balance of probability, that range will be $2.1 million to $3.5 million in 20-years’ time.

Unless the federal government finds the courage to force every state and territory into a cold-turkey addiction snap, 20-years from now Australians will be expected to find between $100,000 and $200,000 to cover the stamp duty. And the total annual cost will exceed $200 billion.

For every year that government substance abuse is tolerated, millions of household dreams get squashed.

I am not in favour of replacing the current lump sum (stamp duty) on those who buy real estate with an annual (land tax) on everyone who owns real estate. Doing so is akin to replacing heroin with cocaine.

I would rather see 100 percent of Australia’s workforce paying a Medicare-style ‘housing levy’.

The current national annual wage bill exceeds $1.1 trillion. A 3 percent ‘housing levy’ imposed on everyone in the workforce equates to a very similar figure to the current $35 billion stamp duty cost.

Instead of raising $35 billion per year from charging less than 5 percent of Australian households with a $30,000 to $80,000 ‘handling fee’, it would be much more sustainable to charge 11.5 million households an annual ‘housing levy’ of (say) 3 percent of their gross income, similar to the Medicare levy.

Spreading such a big load will remove a huge barrier and create a pathway for significantly higher rates of housing participation.

Without the imposition of an enormous upfront lump sum (stamp duty), more young people will be able to acquire their first home sooner (and with a smaller mortgage).

Related article: Top 10 tips for property investors

Even more important for everyone will be the significantly improved household mobility rates. Growing families, lifestyle upgrades and relocations for career opportunities will all be winners.

Tenants will benefit from having a bigger rental pool to choose from, and society will broadly benefit from a lesser amount of taxpayer funds used to pay aged pensions.

The history of this (real estate) substance abuse

The colony of NSW was the first to introduce stamp duty on real estate in 1865.

The primary purpose was to develop a system that protected the integrity of real estate ownership and for official recording of transactions relating to individual properties, such as mortgages and ownership transfers.

To circumvent the loss, theft, damage or fraud of old-fashioned real estate title deeds, it was decided that a representative of the government would place an official mark (a unique ‘stamp’) on property ownership documents as a means of authentication.

To cover their administration costs, governments charged a small ‘handling fee’ for stamping documents and maintaining government records.

As the colony’s population and the volume of real estate transactions swiftly increased, government revenue generated from the handling fee quickly became a valuable stream of income which they grew to rely upon to fund various election promises.

Victoria subsequently introduced its own stamp duty in 1879, followed by Tasmania (1880), Queensland (1894), Western Australia (1921) and South Australia (1923).

100-years after all 6-states were using a stamp duty policy us a means of administering real estate ownership, they were generating $35.6 billion revenue in one year. Just for shuffling a few documents.

There’s ‘clipping tickets’ and then there’s outright abuse of power and thuggery.

Propertyology are national buyer’s agents and Australia’s premier property market analyst. Every capital city and every non-capital city, Propertyology analyse fundamentals in every market, every day. We use this valuable research to help everyday Aussies to invest in strategically-chosen locations (literally) all over Australia. Like to know more? Contact us here.

We walk-the-walk. Here’s a recent example of our work for a client.