Victoria should explore ditching stamp duty and replacing it with a land tax to improve housing affordability, a powerful parliamentary inquiry has recommended.
The inquiry’s final report found that stamp duty disproportionately affected divorced women and younger people and was a barrier to home ownership.
It recommended the Victorian government explore ways to replace stamp duty with a broad-based land tax as an alternative.
While nearly all parties agreed stamp duty was not a fair tax, they differed on how to tackle the problem.
Younger Victorians ‘disproportionately’ hit by tax
Stamp duty is the most lucrative tax for the Victorian treasury, raking in more than $8.2 billion last year, more than a quarter of the state’s tax take.
The report found that stamp duty was negatively affecting housing stock and affordability, and discouraged people from moving house.
“Stamp duty is not an equitable tax, with a small percentage of people carrying the burden of a significant proportion of the state budget,” the report found.
“In addition, those carrying the burden are disproportionately younger people with fewer resources, as they are more mobile, and older people whose capacity to pay may be diminished as they reach retirement.”
The report stopped short of calling for an immediate scrapping of the tax, instead urging a national approach.
It said without national agreement, the government should “urgently explore state-based reform options, including conducting an investigation into the feasibility of abolishing stamp duty and implementing a broad-based land tax as an alternative”.
Stamp-duty tax reform is already underway, with a government plan to phase out stamp duty for commercial and industrial properties from July next year.
Instead, an annual property tax will be applied for 10 years, but it will not apply to existing property owners.
“Stamp duty adds to the cost of purchasing property,” the state budget said.
“Its application to commercial and industrial properties impedes growth and productivity as it discourages businesses from investing in property to grow their operations and employ more workers.”
Premier ‘unconvinced’ reform is needed
The parliamentary inquiry also raised concern about bracket creep.
This is a problem where Victoria’s rising property prices are pushing more people into higher stamp-duty rates.
Stamp-duty rates have not been substantially adjusted since 2008, the Parliamentary Budget Office said.
Premier Daniel Andrews has previously said he is “unconvinced” that replacing stamp duty for residential properties would bring benefits.
The inquiry recommended the state also work on more measures to boost housing supply — Mr Andrews is set to unveil a major housing strategy in coming weeks.
Differing views on how to phase out stamp duty
There were several dissenting opinions from committee members, with the Greens calling for an immediate transition from stamp duty to land tax, while the Libertarian party said stamp duty should be abolished but not replaced.
Shadow Special Minister of State David Davis said the report should have been more critical of the Andrews government’s track record of rising house prices and taxes.
He also said the Treasury should be forced to publish key modelling on stamp-duty reform options, which have been completed but remain secret.
The Coalition is also concerned that transitioning to a new land tax could result in some people being taxed twice.
“We do not believe Labor can be trusted to introduce a broad-based land tax on the family home,” the Coalition’s dissenting report said.
“We do believe that further transparent and publicly released modelling could inform public debate on additional tax reform options.”
The state government said it was finalising its reforms and would announce its changes by the end of the year.
“We know there’s no more important issue right now than housing,” a government spokesperson said.
“That’s why we’re working hard on a housing package and will have more to say shortly.”
(ABC)
