Stamp duty remains a major stilt on home ownership in Australia, but some states and territories are making moves to reform this outdated tax.
Stamp duty is a big revenue raiser for governments, however it’s moreover a major hurdle for first-home buyers once struggling to save unbearable for a home deposit.
The tax moreover influences existing homeowners when they’re looking to upsize or downsize, delaying or restricting the number of homes that are worldly-wise to come onto the market.
As home prices rise and housing affordability declines, calls have been growing overly louder for governments to replace hefty, up-front stamp duty financing with smaller and increasingly incremental land taxes.
President of the Real Estate Institute of Australia, Hayden Groves, says stamp duty remains a major hurdle to first-home buyers, those wanting to move virtually the country or invest in much-needed rental supply.
While most states and territories offer stamp duty rebates for first-home buyers, Mr Groves said the visualization by NSW to add existing homes to its stamp duty exemptions was a welcome change, given some states only unromantic concessions and waivers to new homes or vacant land.
“However, increasingly needs to be washed-up with the implementation of a deferred stamp duty payment option that works like a ‘HELP’ (HECS) debt is a necessary reform that would self-ruling up property markets wideness Australia,” he said.
Replacing stamp duty with a land tax would uplift housing supply by freeing up increasingly homes for sale. Picture: Getty
“NSW and ACT have implemented a version of this model, but both have unexplored an tideway that saw either huge increases in land taxes or a deferral of stamp duty that follows the property not the individual, remoter distorting the market.”
Following its referendum this year, NSW Labor scrapped the previous governments stamp duty reforms for future homeowners, which gave first-home buyers the option to pay stamp duty or an ongoing yearly land tax when they purchased a property.
Instead, NSW Labor leader Chris Minns lifted the purchase price threshold for first-home proprietrix stamp duty exemptions from $650,000 to $800,000, and concessions from $800,000 to $1 million.
ACT the standout in stamp duty reform
Having started a 20-year journey to phase out the tax in 2012, the ACT has been leading the way in stamp duty reform.
The territory has been slowly phasing out stamp duty while raising steering rates, as part of a two-decade process to make it as equitable as possible for residents.
Last month, the ACT government took flipside step in that journey without expanding the stamp duty exemption to include dual occupancies and encourage homeowners to build a second home on their properties.
Proptrack senior economist Angus Moore said the ACT was the standout leader in replacing stamp duty with a broad-based land tax.
“It’s easier for the ACT considering it’s a combined state and local government, so they don’t have that split between the state taxes and steering rates,” he said.
“But the model is certainly one that other states could consider. The 20-year transition is a long time, but it has helped bring stamp duty burdens lanugo pretty significantly in the ACT compared to where they otherwise would have been.”
Mr Moore said Victoria was moreover making in-roads on stamp duty reform, however not in the residential space.
The ACT has been leading the way on stamp duty reform in Australia. Picture: Getty
Earlier this year, the Victorian government spoken plans starting from next year to unmarry stamp duty for commercial and industrial property.
From 1 July 2024, buyers of these types of properties will have the option to make a one-time stamp duty payment or pay it annually over a 10-year period.
“It’s a variegated model to what we’ve seen elsewhere and it’s an lulu way to undertake that transition,” Mr Moore said.
Why reform is so hard
Governments fear that replacing large, upfront stamp duty payments with smaller ongoing land tax payments will lead to holes in funding during the changeover period.
"For a tax that was supposed to be superseded with the prelude of the GST, state and territory governments revenue take from stamp duty is 10-30% of total revenues,” Mr Groves said.
While stamp duty reform is challenging, the benefits would go a long way to addressing Australia’s housing crisis.
NSW Premier Chris Minns scrapped the land tax option for future homeowners in the state. Picture: NewsWire / Monique Harmer
If stamp duty was reformed, the REIA estimates property listings would increase between 5-40%, depending on the jurisdiction, freeing up supply and easing the current housing shortage.
It says it would moreover provide governments with a increasingly stable source of revenue that doesnt fluctuate as much, given the volatility of the housing market.