3 Months ago the Queensland Treasurer Andrew Fraser had this to say about stamp duty on residential dwellings.
One of Queensland’s most despised taxes could be axed to save homebuyers tens of thousands of dollars. Homebuyers have paid more than $12 billion in stamp duty since 2006 but the State Government yesterday said it should be dumped.
Treasurer Andrew Fraser described stamp duty as a “relic” and an “inefficient” tax. He said it would be at the top of the state’s “hit list” at a federal tax summit later this year. Federal Treasurer Wayne Swan refused to comment, but housing and real estate groups have welcomed the move.
Homebuyers have to pay about $20,000 stamp duty up-front for a property bought for $550,000, and more than $33,000 for a property worth $900,000. Mr Fraser told The Sunday Mail he could not lift the burden from homebuyers until Canberra reformed the tax system, but he hoped stamp duty could be abolished within five years.
All of which I agree with, in fact I was led to believe that all of these state government taxes were to disappear once the GST was implemented. Silly me!
What makes those words somewhat bizarre is that he and the Premier of Queensland fronted up to the media yesterday afternoon to explain they were actually doing the exact opposite. (click on the picture to see the video)
In the video Andrew Fraser mentions that he is removing the deduction of primary place of residence stamp duty as of August 1. By removing the stamp duty concession non-first home buyer owner occupiers purchasing a median value property in Queensland will pay an additional $6,300. You can see from the ticker in the picture that the Queensland government has also announced a $10,000 grant to anyone who buys a new home under $600,000, but as far as I can tell, unless these people are first home buyers they will be paying the additional stamp duty. So in fact what the Queensland government has actually announced is an increase in stamp duty on existing dwellings for non-first home buying owner occupiers, and a very small grant ( $3700 on a median priced new build ) for non-first home buyers who build a house if it is under $600,000. The only cohort that actually gets any real value out of this are first home buyers who decide to build. I am not sure what percentage of the market that is, but I don’t think it could be a large number. Unless I am completely misinterpreting this, it actually looks like a poorly disguised government cash grab and at a minimum a massive back pedal from the Treasurer.
At a time when the Queensland housing market is in rapid decline, how on earth is an increase in stamp duty on existing dwellings for owner occupiers (the largest component of the market ) going to help the anyone?
But there is more.
The Premier has also announced the removal of the Queensland ambulance levy from electricity bills, this will save the average family with one dwelling $2.10/week. Again I am somewhat confused by this move as it seems a very small amount of money and the Queensland governments own site states.
As the voluntary subscription scheme was not providing enough money to fund the QAS, and the Federal Medicare levy did not fund ambulance services, the Queensland Government decided to raise this money through charging a community ambulance cover levy.
So who or what is going to pay for it now?
The budget is in deficit by $4.08 billion for 2011/12 and will continue to run an operating budget deficit until 2014/15 where the total borrowing is forecast to peak at $48.16 billion. This, however, is based on an economic growth forecast of 5% for the next financial year and 5.25% the following year. Given the current state of the housing market in Queensland, even before these latest changes, and the build-up of risk in the world economy I find these forecast highly optimistic.
None of this has changed my prediction that Queensland is heading for a recession, so too is the popularity of Anna and her Treasurer.