Calls for change in Victoria follow confirmation that to introduce an optional annual land tax for people wishing to avoid the stamp duty hit.
NSW Premier Dominic Perrottet (left) will switch out stamp duty in his June budget,while Victorian Premier Daniel Andrews would not confirm whether he would follow suit.Flavio Brancaleone,Joe Armao
Stamp duty has been criticised by many economists as a grossly inefficient tax. It has also been blamed for exacerbating the housing affordability crisis,discouraging people from moving or downsizing and adding a layer of unpredictability to state budgets.
Several well-placed sources have toldThe Age that Victoria has examined a similar proposal to that of NSW’s in detail. The sources say the state treasury was working on various housing tax reform options before the pandemic struck in 2020,but the idea was then shelved.
the choice between an annual land tax or a one-off stamp duty will put competitive pressure on other states to follow NSW.
But on Monday,Premier Daniel Andrews declined to say whether Victoria would consider a similar stamp duty overhaul.
“Yes,I’ve seen some announcements out of NSW,” Andrews said. “I’ve got no announcements to make about taxation today.”
Under the NSW plan,to be announced in the June 21 state budget,the option of replacing stamp duty with an ongoing land tax will not apply to the top 20 per cent of homes by sale price to help limit the expected drop in the government’s revenue.
And although past buyers would not be affected,the move to a land tax would be permanently linked to the property. That means future owners would need to pay land tax if previous owners had opted in.
The Victorian government remains cautious about what some see as a politically risky reform five months from the November 26 election,particularly as the state wrestles with an energy crisis,soaring inflation,rising interest rates,budget challenges,and a severely stretched hospital system.
Matthew Kandelaars,chief executive of the Urban Development Institute of Victoria,said there was universal agreement that stamp duty was a “terrible,inefficient tax”,and urged the government to seriously consider a similar overhaul.
“The budget’s current reliance on stamp duty ... places the eggs of Victoria’s economic bounce back in the one basket,” Kandelaars said.
“In the midst of inflationary pressures and rising interest rates,the property market is under pressure. Tax reform to reduce the burden on homebuyers and remove barriers to entry will de-risk the state’s economic recovery.”
A survey of 1000 people conducted by the institute last October found that 43 per cent of respondents with a mortgage thought the removal of stamp duty would make housing more affordable.
Stamp duty could be scrapped for thousands of prospective home buyers in NSW under a new model proposed by the state’s treasurer in the 2020-21 budget.
Property Council of Australia Victorian executive director Danni Hunter agreed that stamp duty was an inefficient,overly onerous tax that required a rethink.
She said if the federal government were to back the reform push – including by agreeing to meet revenue shortfalls – it would provide a powerful incentive for other states to follow NSW.
But Hunter said any decision in Victoria would need careful consideration,with sufficient time for consultation needed to get the design right.
“Stamp duty is an incredibly inefficient tax,” she said. “It’s a barrier and a burden to many people looking to change their housing situation or get into the housing market. So it certainly is time to have the discussion about better taxes and not more of them.”
Housing Industry Association Victorian executive director Fiona Nield said Victorians already paid the highest stamp duty in Australia.
“We see stamp duty as being one of the most inefficient taxes around,” Nield said. “It affects people’s decision-making for home buying,it’s a barrier for people entering the housing market,and it actually discourages people from moving house.”
She said it also discouraged older Victorians from downsizing,which meant the housing stock was under-utilised.
Federal Treasurer Jim Chalmers toldThe Age last week that his government wanted to work with the states to “address the substantial challenges we all confront in the economy,and in our budgets”.
Last financial year,the,equivalent to about 27.2 per cent of the state’s total tax take. The NSW government raised $9.4 billion in stamp duty,or 28 per cent of the tax total.
The NSW government has estimated that,once introduced,an optional annual tax would collect about 20 per cent less revenue,which equates to a projected shortfall of about $2.5 billion a year. In Victoria,the figure is thought to be close to $2 billion.
The Morning Edition newsletter is our guide to the day’s most important and interesting stories,analysis and insights..