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The Victorian government has revealed how much of its state economy relies on stamp duty, which the Housing Industry Association has condemned as “inefficient and inequitable”.
The Victorian Treasury revealed on Tuesday that, as a result of the softening property market, the state government will be short $2.4 billion from its budget.
According to Fiona Nield, executive director of the HIA, the softening market is resulting in a downturn of stamp duty, which then results in a downturn for the Victorian state economy, highlighting “the volatile nature of stamp duty revenue”.
“Over the last decade, successive governments have become ever more dependent on stamp duty. Stamp duty on homes now accounts for 30 per cent of the state’s revenue,” Ms Nield said.
“Three dollars in every 10 of Victorian state revenue come from this highly inefficient tax on people buying a home.
“The stamp duty liability incurred by a home buyer purchasing a median-priced home in Melbourne equates to an extra 5.2 per cent of the purchase price. This is a higher rate than any other city in the country and is shortchanging Victorian households.”
Even though the stamp duty decline will not impact buyers directly, the influence of stamp duty is being felt by the government, impacting what the Victorian government can invest back into the state.
“Stamp duty is an inefficient and inequitable tax. There is no need for the state budget to be highly subject to volatility in the economy and the housing market. There are better options for raising revenue than stamp duty,” Ms Nield said.
“Victoria should follow the example of the ACT and phase out stamp duty altogether and replace it with a form of revenue that doesn’t punish home buyers pursuing their dream of home ownership.”
This announcement follows comments made by the president of the Real Estate Institute of Australia Malcolm Gunning, who claimed that replacing stamp duty with land tax would be more beneficial to the economy of Australia as a whole.
“Research shows that abolishing stamp duties and replacing them with land tax not only has a greater impact on affordability than changes to negative gearing and capital gains tax, but improves economic growth,” Mr Gunning said previously.
“It is only then that a strategy can be formulated that pulls the right levers.”
