The decline in the housing market due to the coronavirus might be the perfect opportunity to make a permanent change to save home buyers up to $100,000.
That's according to buyers agent and Your Property Your Wealth director Daniel Walsh, who told Yahoo Finance that Australian states must consider scrapping stamp duty.
"Stamp duty has long been the bane of most property owner’s existences with buyers having to fork out tens of thousands of additional dollars for the supposed “privilege” of purchasing a piece of real estate," he said.
"In some cases, in exclusive Sydney suburbs for example, buyers are stumping up more than $100,000 every time they purchase a home. In many other locations, you won’t get much change from $20,000 to $40,000, depending on the property’s price point."
The problem is that the tax levels were set decades ago when housing was much cheaper, so now in the eyes of stamp duty rules, all buyers are purchasing 'luxury' housing.
"Over the decades, as the price of property has increased, the percentage rate of stamp duty has generally stayed the same, which has resulted in the cost of stamp duty soaring."
AMP Capital chief economist Dr Shane Oliver told the same message to Domain last month.
"Stamp duty is a terrible tax, it should be repealed and this is the perfect time to do it," he said.
"The problem with stamp duty is that it’s a massive impost on a single transaction which inhibits economic decision-making in a less-than-optimal way."
Walsh said removing stamp duty would mean first home buyers could purchase sooner because that money would go towards their deposit.
"For example, in Queensland, the stamp duty on a $500,000 home is about $18,000.
"Say, a would-be buyer had saved $68,000, but no longer needed to pay stamp duty, their purchasing power has increased by a staggering 26 per cent."
However, some experts are against the idea of eliminating stamp duty, arguing it could inflate property prices and put it further out of reach of many Australians.
"If you take stamp duty away, you’re going to take away a massive barrier to entry and increase demand for property," Metropole Property Strategists director Michael Yardney wrote for Yahoo Finance this week.
"This could push property prices higher and create an artificial property bubble as demand soars."
State governments rely heavily on stamp duty for revenue, so how can this income be replaced?
The proposal from most experts who want stamp duty scrapped is an annual land tax.
"How that will look in practice is not clear, but it’s likely to include an annual fee of a few hundred dollars for all property owners based on the rateable value of their land," said Walsh.
"That system would ultimately be more equitable whilst also providing the income that government’s need from year to year."
Yardney said the current system is already fair, and a land tax would punish people who are not in the property market – or who have already paid massive stamp duty.
"If you don’t buy property, you don’t pay it," he wrote of stamp duty.
"It may not be fun, but it is fair.
"Now, rather than a discretionary tax, every single person in Australia is going to end up paying a little extra for broader taxes that bite at everyone’s budget."
Big reforms usually occur in democracies because of a change in government, but this is a unique chance to enact meaningful change without political upheaval, according to Walsh.
"While all of us would prefer that coronavirus never existed, its impact long-term on our society may also include leaving a legacy of a fairer taxation system for everyone."