Western Australia, like the rest of the country, is feeling the strain of outdated and inefficient taxes. Two of the biggest culprits are stamp duty and payroll tax, which I’ve seen first-hand as both a long-time real estate professional and a business owner. These taxes don’t just burden businesses and individuals—they also hold back economic growth. As we look to the future, it’s worth considering whether these taxes should be scrapped in favour of something that works better for everyone.

I’m no expert in tax reform, but after almost 18 years running a business, here’s my take on why these taxes need a rethink.

What’s Wrong with Stamp Duty?

Stamp duty is a tax you pay when buying property. It’s based on the value of the transaction, and it’s a big money-maker for the government in Western Australia. But here’s why it’s causing more harm than good:

One of the biggest issues with stamp duty is that it makes people think twice about moving. Whether you’re downsizing, upgrading, or relocating for work, the cost of stamp duty can be a huge financial hit. As a result, people stay put, even if their current home doesn’t suit their needs. This creates inefficiencies in the housing market, with fewer homes becoming available for those who really need them.

The housing market in WA has become tougher in recent years. Stamp duty makes it even harder, especially for first-time buyers, by adding thousands of dollars to the cost of purchasing a home. This only pushes up housing prices and worsens affordability, particularly for those on low or middle incomes.

Stamp duty revenue depends on how many property sales happen. In good years, when lots of homes are selling, the government collects plenty. But during downturns, like the global financial crisis back in 2008, the number of sales drops, and the government’s revenue takes a hit. It’s not a reliable source of income.

The Problem with Payroll Tax

Payroll tax is another major tax in WA. It’s a tax businesses pay based on their total wages paid. But there are several reasons why it’s not ideal:

Payroll tax is like a penalty for hiring more people. The more staff you employ or the higher the wages you pay, the bigger your tax bill. This can discourage businesses from hiring new staff or paying competitive salaries, which hurts job creation.

WA businesses are competing in a global market. Payroll tax increases their operating costs, which means they have less money to invest in things like growing the business, improving their services, or training staff. It puts them at a disadvantage compared to companies in other places with lower taxes.

Beyond just paying the tax, businesses also have to navigate the administrative side—tracking wages, staying on top of the rules, and ensuring they’re complying with all the regulations. It adds extra work that takes time and resources away from running the actual business.

What’s the Alternative?

Abolishing stamp duty and payroll tax would remove two big roadblocks to economic growth and housing affordability. But since they’re major sources of government revenue, we’d need to replace them with something fairer and more effective. Here are a few ideas:

  1. Land Tax: One option is to replace stamp duty with a land tax. Instead of a one-off hit when you buy a property, you’d pay a smaller, ongoing tax based on the land you own. This could provide the government with a steadier, more reliable income, and encourage property owners to make better use of their land.
  2. Expanding GST: Another option is to increase the Goods and Services Tax (GST) or extend it to cover more goods and services. This would spread the tax burden across the economy and avoid the issues caused by stamp duty and payroll tax. Countries with higher GST rates, like many in Europe, have shown that this can work without overburdening people.
  3. Income Tax Adjustments: The state government could also consider working with the federal government to adjust income taxes. This would mean shifting the tax focus away from payroll and onto a system that’s more reflective of people’s ability to pay. While not everyone would be happy with this, it could offer a fairer way to distribute the tax load.
  4. Mining Royalties: WA is rich in natural resources, and the state could explore further mining royalties or revisiting the  current agreements in place. While this idea has its pros and cons, a proper review of mining taxes could provide a more stable source of revenue and reduce the reliance on inefficient taxes like payroll tax.

Getting rid of stamp duty and payroll tax would give WA’s tax system a much-needed update. By shifting to alternatives like a land tax, adjusting GST, or exploring other revenue streams, the state could stimulate economic growth, make housing more affordable, and create a more business-friendly environment. It’s time to rethink how we fund our state and find a better way forward that benefits everyone.