Stamps not fit for purpose

Stamp duty remains an impediment to the real estate industry according to peak bodies, with efforts by stakeholders over the decades to encourage the Victorian government to amend this policy, mostly ignored.

A tough habit to kick, consecutive governments have become addicted to this tax as it provides significant revenue to their coffers.

In Victoria, stamp duty equates to approximately 22 per cent of state and local government revenue. Nationally, all forms of property tax raised state and local governments has increased from approximately 31 per cent in 1998-99 to 52 per cent in 2020-21.

This highlights a significant increase in the reliance on land related taxes by governments.

In an effort to create more efficient and equitable tax distribution, and enable greater housing accessibility, the Real Estate Institute of Victoria (REIV) is once again calling on the Victorian government to replace property stamp duty with a broad-based tax.

In its response to Victoria’s Parliamentary Inquiry into Land Transfer Duty Fees, REIV has suggested that a broad-based tax will avoid inefficient and disproportionate effects of house price bracket creep, as well as provide a more stable and predictable revenue stream for government.

The REIV has submitted to government that stamp duty is not only a hit to homebuyers financially, but it also curbs labour and capital mobility.

The peak body has reiterated that the financial pressure that comes with the tax impacts decisions regarding relocation for employment, personal preference, and downsizing or upsizing based on housing requirements.

“The REIV has long sought an abolishment of this tired tax,” said REIV CEO Quentin Kilian who will give evidence at the Parliamentary inquiry’s hearing.

“Stamp duty has created an excessive burden on home buyers for far too long, with fees for the median priced house currently sitting at approximately 48.9 per cent of Victorian’s average annual income.”

Revenue collected by the State Government in 2021-22 from Stamp Duty was $10.3 million, a 61.3 per cent increase from the year before which sat around $6.5 million.

“The nature of land transfer tax is dependent on market activity and performance, which impacts government revenue predictability,” Mr Kilian said.

“The fluctuation in revenue points to the fact that when households are in need, government revenue is likely to also be impacted making meaningful policy intervention more difficult,” Mr Kilian added.

Mr Kilian said removing stamp duty would allow for a more sustainable market environment and encourage activity, benefitting the economy.

“Recent economic fluctuations, such as limitations on real estate activity during COVID and increases in interest rates, influence individual decisions to engage or not engage with housing markets, further impacting government revenue.

“As stamp duty increases the cost of moving, people may choose to remain where they are rather than pursue job opportunities elsewhere – contributing to the lack of skilled labourers in areas of need, negatively effecting productivity,” REIV’s submission states.

The REIV has urged the Victorian government to invite stakeholders and experts to contribute to a roadmap that supports home ownership while maintaining tax income for the state.

“We have long called for stamp duty abolishment and believe that a broad-based tax system will be beneficial for the economy and housing market in Victoria,” Mr Kilian said.

“We look forward to further conversations with policymakers about how the government and sector can move forward together and create a better system for all Victorians.”