The Victorian government is reportedly mulling plans to scrap stamp duty in favour of a broader annual land tax as part of its economic recovery.
As it stands, the Victorian government makes around $6 billion a year from stamp duty, but according to reports in the Herald Sun, the government is exploring plans to replace stamp duty with a cheaper land tax.
Property sector participants and economists have all lobbied for the removal of stamp duty, describing it as a major barrier to housing affordability.
In Melbourne, where the median house price is $845,000, stamp duty will add an extra $45,770.
And in Sydney, for a home worth $882,849, the buyer will be slugged with stamp duty of around $35,000. It’s something the Real Estate Institute of NSW (REINSW) has described as “inefficient, unreasonable, unfair… [and] unnecessary”.
As the property market is tipped to slow significantly, any policy that puts extra juice into the market should be considered, the REINSW said.
“Obviously, there are immediate economic benefits stemming from an increase in residential transactions,” said CEO Tim McKibbin.
“Yes, there’s agents, but there’s also the marketers, the signage producers, the copywriters, the photographers, the IT gurus, the stylists, the surveyors, the conveyancers, the pest and building inspectors, the removalists and more. The list goes on and on.”
The Reserve Bank of Australia governor Philip Lowe has also said “the way we tax income generation, consumption and land” should be on the agenda for coronavirus recovery.
The Productivity Commission’s major Shifting the Dial report is also unequivocal, it labels stamp duty a “bad tax”.
“Stamp duties are bad taxes, a bonanza in times of rising housing prices, but unfair and inefficient,” it states.
“Stamp duties on property transfers raise the cost of housing, discourage people from moving to more desired locations, and prevent the freeing up properties for more valued uses. They are also one of the most inefficient taxes in Australia. There is a strong case to transition from stamp duties to taxes based on unimproved land value.”
It noted Treasury modelling which found every $1 collected from stamp duty leads to a reduction in Australian households’ living standards of 72c over the long term, as reduced investment and mobility bite.
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