The decision put forward as part of South Australian Government’s stamp duty reforms has generally been a positive one, particularly in the real estate sector where the move was heralded as a “green light for investment”.

So far the other states have held off on following South Australia’s lead, principally due to the greater loss of revenue they would suffer without a replacement revenue stream. This is understandable - with approximately 6,000 commercial and industrial property transfers occurring annually in South Australia, it is estimated the scrapping of stamp duty is to cost $389 million over the three year phase out period alone. For other states this cost may seem too great to bear, especially at a time when change to GST (the likely potential replacement revenue stream) is such a contentious issue between governments at both a state and federal level. 

The South Australia State Government nonetheless concluded the duty abolition worthwhile. Premier Jay Weatherill has professed the cuts as making the state ‘a more competitive place to do business’ and, at this stage, while South Australia remains the only state or territory undertaking such dramatic taxation reform, it should provide a competitive advantage, assisting to attract capital investment and reinvigorate economic growth. 

This advantage however may be lost before it is ever felt. Some in the industry point out the decision to gradually abolish the tax has created an imminent danger of a ‘handbrake’ effect on commercial real estate transactions over the next two years. It is thought commercial property investors may see genuine merit in waiting for the clock to tick over to ensure the maximum benefit is gained, effectively stalling development at a time when economic stimulus is desperately needed. Alternatively, where the cuts do perform, other states may decide they like what they see occurring in South Australia and could easily implement immediate duty reductions. Thus rendering our three year phase out old news and taking with it the tax incentive of doing business in South Australia.

Regardless of one’s view it is evident governments at all levels, as well as those in the property industry, will be closely watching how South Australia’s reforms play out.

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