STAMP duty reform in Victoria is long overdue and its removal must be a priority if the State Government is serious about improving home affordability, according to HIA’s Victorian Executive Director, Keith Ryan.
Mr Ryan’s remarks come as the Housing Industry Association leads fresh calls to lower the burden of stamp duty.
“HIA research shows the rate at which stamp duty is charged is most punitive in Victoria: equivalent to 5.3 per cent of the property’s value,” Mr Ryan said.
“This means the typical Victorian homeowner pays $39,170 in duty on a median property worth $735,000. That’s nearly $40,000 most home buyers would rather put towards their new home than see vanish into the state’s coffers,” he added.
“Not only are home buyers paying more than they should to purchase a new home, their housing choices are also being compromised.
Unless they borrow more to cover the cost of stamp duty they are forced to search for and purchase a less expensive home in a potentially less optimal location, than if stamp duty was not levied.
“At time when Victoria needs more houses to meet growing demand, stamp duty also makes investment in new housing supply less profitable.
“A sizeable share of the seller’s proceeds is consumed by the tax. Multiple points in the development and construction process are also hit by stamp duty, including the sale of the land to the initial developer. This undermines housing affordability.
“The Victorian Government has long become overly dependent on a tax that is very inefficient and inequitable. It taxes households that move to seek employment and education opportunities. It forces people to stay in homes that no longer meet their needs. Stamp duty is also an unreliable source of revenue for the government because of the cyclical nature of the housing market.”
Mr Ryan said penalising households for pursuing the Australian dream of home ownership did not lead to good economic or social outcomes.
He warned that Victoria risked falling behind in the tax competitiveness stakes while it remained reliant on stamp duty revenue.
HIA’s Stamp Duty Watch report, released last week, reviews the latest developments around stamp duty across Australia’s eight states and territories. It shows there are numerous strategies that governments can pursue to reduce the burden of stamp duty.
This includes the phased abolition of stamp duty in the ACT which is helping improve revenue stability and predictability, enhance economic efficiency and lift home ownership rates.
In New South Wales, the newly elected government moved quickly to abolish stamp duty for first home buyers on homes under $800,000 from July 1 this year.
“Both approaches are a step in the right direction. The Victorian Government should use the coming 2023-24 State Budget to start stamp duty reforms that provide a timely and much needed boost to housing industry activity, employment, investment and confidence,” Mr Ryan said.
