Mortgage tax to be cut - homebuyers will save thousands

16 April 2004

Stamp duty on mortgages will be abolished in next month's State Budget, saving some homebuyers thousands of dollars.

Starting on January 1, the stamp duty saving on a $200,000 mortgage will be $689, rising to $1039 on a $300,000 loan.

From July 1 next year, all remaining forms of mortgage duty, including non-residential property mortgages, will be phased out over three years.

The decision will cost the Government $230 million in lost revenue over the next 4½ years.

State Cabinet signed off on the May Budget at a special meeting yesterday.

Although there is still likely to be minor "tweaking", it was decided to release the stamp duty decision early because it was a major concession.

Premier Mike Rann said the cuts should provide "a huge boost to our economy at this very crucial time".

"We are going for growth and going for jobs," he said.

Mr Rann said the savings would begin from January 1 next year, when an estimated 25,000 owner-occupiers who took out home mortgages or refinanced their mortgage each year would benefit.

"This will save those homeowners $26 million a year by 2006-07 – rising to $31 million by 2009-10," he said. "This is the equivalent of a 0.35 per cent discount on their interest rate in the first year."

Mr Rann said the savings to households and businesses would be $56 million a year by 2009-2010.

Currently, first homebuyers receive a full stamp duty concession on first-home purchases valued up to $80,000.

In the 2004-05 Budget, that concession was extended to provide a partial stamp duty concession for first homes valued above $80,000 up to $250,000.

Property taxes, including stamp duty and conveyance duty, are estimated to raise $979 million in the current financial year rising to $993.5 million in 2007-08.

The new concession comes only three days after the Government told Parliament any further stamp duty relief could generate further upward pressure on house prices rather than improving affordability.

Mr Rann said yesterday the latest decision was another significant tax cut for 150,000 businesses and households following on from other tax cuts in last year's Budget.

"Rather than being complacent with record numbers of South Australians in jobs, we want to keep confidence and momentum going," he said.

"The abolition of stamp duty on refinancing mortgages for the owner-occupier will also help create a more competitive environment among the banks."

Mr Rann predicted further tax cuts saying the Government's history on cutting taxes was "one we are very proud of and is one that will not stop here".

In a written answer to a question from Liberal MLC Angus Redford in Parliament on Tuesday, Mr Rann said that in an environment of strong growth in property values driven by demand pressures, "the most likely impact of further stamp duty relief is that it will generate further upward pressure on prices as stamp duty savings are used to bid up house prices".

"Providing tax relief or increasing grants to first homebuyers may be counterproductive if the end result is to keep upward pressure on prices.

"The beneficiaries of tax relief may be the sellers, not the buyers, of property."

This week, Treasurer Kevin Foley warned of the danger of this year's Budget plunging into the red because of demands by federal Treasurer Peter Costello for the states to cut a range of business taxes over the next four years. SA is asking that the cuts be phased in over six years.