Sometimes on the way to your dream,

you get lost and find a better one.

Thursday, February 26, 2015

Thursday Thoughts #35

from Skin Game. A Harry Dresden novel by Jim Butcher.

"There's power in the touch of another person's hand. We acknowledge it in little ways, all the time. There's a reason human beings shake hands, hold hands, slap hands, bump hands. 
It comes from our very earliest memories, when we all come into the world blinded by light and colour, deafened by riotous sound, flailing in a suddenly cavernous space without any way of orienting ourselves, shuddering with cold, emptied with hunger, and justifiably frightened and confused. 
And what changes that first horror, that original state of terror?
The touch of another person's hands. Hands that wrap us in warmth, that hold us close. Hands that guide us to shelter, to comfort, to food. Hands that hold and touch and reassure us through our very first crisis and guide us into our very first shelter from pain. 
The first thing we ever learn is that the touch of someone else's hand can ease pain and make things better. 
That's power. That's power so fundamental that most people never even realise it exists."


There's talk here lately of our government replacing stamp duty on home purchases with a yearly $1200 land tax instead.
Naturally, there's quite the hue and cry about this. 

People who purchased a home many years ago, or even quite recently, have already paid their stamp duty. Now they're going to have to pay a yearly land tax as well? 
Unfair you say? Seems unfair to me too.
Stamp duty on home purchases is quite steep here in South Australia, on a home worth $400,000 it's around $15,000.

I read the real estate pages every Saturday, planning which house I might buy in which area should I be lucky enough to win lotto, (*~*) and I've noticed house prices are quite high. There's not a lot around for $400,000 if you want to live close to the city, or in a good neighbourhood. In those areas you're likely to pay $600-$800,000, with  $22,500 to $30,000 added in stamp duty. 

It seems like a lot of extra money and I've been against stamp duty for a long time, the GST was supposed to replace it and of course that didn't happen. 
I'm not the only person to be against stamp duty and certain government departments or persons (I don't really know who) have decided that the stamp duty is stopping many people from buying or building a new home or in the case of younger couples, their first home. 

This is where the 'new and improved' idea comes in. Abolish the stamp duty and hit them with a yearly land tax instead. 

So I got out my trusty calculator and did a sum or two. $1200 over a lifetime in a home of your own, say 35 years, is $42,000.  More than stamp duty, but not by much, which makes it seem a fairer deal.

But, it's a cost that will have to be factored in to the yearly budget on top of the mortgage, whereas the aforementioned stamp duty is added to the original purchase and factored into the monthly or fortnightly mortgage payments.
 
So which is the better deal? A one off stamp duty? Or a never ending yearly land tax? 

It depends on how long you stay in your home. 
If you buy your home and never move again, you could end up paying much more in land tax than you would have in stamp duty. 
Not fair. 
If you buy and move several times a yearly land tax might be a cheaper option. 

The biggest problem I can see, lies with people who already own their home or are paying off a mortgage which includes the stamp duty.  There needs to be a dated cut-off point and an exemption from the new land tax for those already owning or having a mortgage in place. 
It just isn't right to hit them with a land tax as well.

One solution could be a set date where new purchases do not incur stamp duty, but the yearly land tax instead. 

Of course, the land tax idea hasn't yet been decided on, perhaps the stamp duty will remain instead. 

It's all a bit of a headache isn't it? I wouldn't want to be the person who finally decides one way or the other and has to announce that decision to the general public. 
Unless that decision exempts those who already own etc.

An easier decision might be to lower the amount of stamp duty we pay here in SA. 
Why is it so high anyway??
In Queensland stamp duty is only $6,000.

11 comments:

  1. The Stamp Tax should definitely be grandfathered in, and if the politicians do otherwise, they should be voted out!

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  2. It seems to be a sort of sales tax. I see it's levied on other purchases, too. Here sales taxes collected by the state are redistributed to localities to provide services like road repair. Our current governor rescinded much of the redistribution, which has been in effect since the 1930's, throwing the burden back on the local governments. I don't understand why he is still in office, except people don't read and think before they vote--if they vote.

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  3. Six of one and half a dozen of the other, I guess. What's more painful the instant extraction of a tooth...or a long drawn out one?

    I can't see me owning another property any time soon, unless, like you, River, I win the Lotto! And as much as I'd like to have that happen...win the Lotto (and see you win it, too)...I think, unfortunately, there is very little chance of that particular golden egg landing in my lap - so here I remain, renting my little cabin. I'm not complaining...I have four walls to surround me and a roof over my head...and good landlords. :)

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  4. If they go with land tax, they should make it apply to homes that are sold after it is introduced only, as all homes sold before that date have all ready paid and should only apply for a set time so if you don't move you are not paying off forever .
    Merle...............

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  5. I think our home stamp duty is quite high too, and I do remember that the GST was supposed to replace all state taxes. I don't like the idea of the land tax at all. Such things usually hit those who can least afford it. It could also lead to a lot of property churning when it is cheaper to buy and sell houses.

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  6. joeh; our politicians always do what the people don't want, then they get voted out and the new lot that come in do exactly the same thing but in a different way, hoping the people won't notice. But of course we do.

    Joanne; the GST is a sales tax, it's on almost everything. Stamp Duty is a different kettle of fish, an addition to major purchases such as a home or car. (I'm not sure about the car, I've never bought one) When the GST (goods and services tax) was brought in, it was supposed to abolish many smaller taxes including Stamp Duty, which isn't small by any means. So a lot of smaller taxes were removed, but have been sneaked back in under other names, so we're no better off. You americans pay a GST too, everytime you buy something, you pay the price, "plus tax", for us the tax (GST) is factored into the price.

    Lee; I give you permission to win Lotto straight after I do. We'll celebrate together (*~*) I'm not complaining about my four walls either, it's better than a cardboard box under a bridge. But if it comes down to a choice between the stamp duty and a yearly land tax, oooh, wait a minute! Don't property owners who have paid off their homes already pay a land tax? I've just now remembered a conversation with a customer who was telling me how her land tax had been increased by 200% that year and she is a pensioner and a widow, worried about how she was going to come up with the money. I'll have to look into this!

    Merle; see my comment to Lee above you. I think there already is a land tax in place, under another name, property tax or something. I'm going to have to email my local MP.

    Andrew; Damn these memory flashes, now I have to do more research. The one thing that makes me prefer stamp duty is it gets paid off, where a land tax is forever. Unless it cuts out once your mortgage is paid and I can't see any politician willingly giving up a nice hefty yearly chunk of cash from millions of homeowners.

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  7. I don't like either. But, if I had to choose one, then it would be the one-off stamp duty option... even though it is all institutionalised theft.
    A yearly land tax sounds positively medieval, and will hit people when and where they least need it. And, lets face it, no time is a good time for another bloody tax.

    I worry for the kids of this and future generations.
    This is already one of the most inflated, expensive countries in the world to live in.
    I don't know how/if they are going to be able to afford their own home. Not with huge HECS debts they must pay when they leave school and get a job. Debts incurred to get qualifications to make a decent wage - both partners - in order to buy a home. They have to pay the HECS, the mortgage and high cost of living. There's little time/money for children. No wonder some women are either opting not to have children, or having them much later in life.

    Home owners are very lucrative cash cows.

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  8. It has been lovely to "meet" you out in blog land today River. Thank you for stopping by my blog. I loved your piece about hands, so true.
    So for a yearly land tax - I would absolutely be against it as we paid stamp duty, on this house, the one before, and the one before that, and paid off our house about 10 years ago. I wouldn't want to have an extra charge thrown at me now when we are trying to work out our retirement plans.
    Have a lovely week River. I will try to do a post about "depth of field" !

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  9. River.. I think all this sounds very unfair and I hope it doesn't get introduced.....it's hard enough to become a homeowner as it it.....
    Hugs ... Barb xxx

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  10. Vicki; perhaps they'll change the name and call it a levy instead, because they think we're not smart enough to know a tax and a levy are one and the same. either way is wrong, the tax AND the stamp duty. If the amount of stamp duty could be reduced, (at least brought into line with the cheaper eastern states) that would be a big help for young couples wanting to buy their first home at least.
    The HECS debt is another problem, because you don't start paying it back until you are earning a certain amount, all those loan amounts are in limbo, lost to the government, when students fail to gain employment in the field they've studied for, or simply stay at school learning a raft of different subjects. My daughter was married for ten years and had two children before my son-in-law finally paid off his HECS debt.

    Jill Harrison; welcome to drifting. The piece about hands is a quote from a book I've recently read. All of my Thursday Thoughts begin with a book quote or two.
    I'm more in favour of stamp duty now that the Land Tax idea has been floated, but I do wish the amount payable here in South Australia could be reduced.
    I like your blog, I have a camera myself and take it out walking now and again, I have no idea about all the fancy settings, just leave it on auto most of the time. I'll keep an eye out for your 'depth of field' post.

    Barbara; I've never owned a home in my life. Rented, rented, rented. We did build twice, so there were two chances at ownership, but each time, hubby got behind on his mortgage payments without me knowing and we had to sell. If only we'd talked about money....I would have been able to maybe sort something out, but by the time I found out, it was already too late. And he'd been hiding his gambling debts for quite some time.

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  11. In Victoria, there are both Stamp duty and land tax! We never live in our own properties, too expensive. cheaper to rent.

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