The Victorian government is reportedly weighing up the option of allowing homebuyers to choose yearly land taxes instead of an upfront stamp duty payment, as part of reforms aimed at combating housing affordability and broadening the state’s tax base.
Record-breaking stamp duty revenue raises concerns
Last financial year, stamp duty raised a record-breaking AUD 10.4bn – 33.9% of Victoria’s total tax take. This proportion was significantly higher than the long-term annual average of 23%. Property taxes, including land taxes paid by investors, contributed to 47.5% of Victoria’s tax haul in 2021-22. The reliance on the fluctuating property sector for government revenue has raised concerns.
Decrease in stamp duty, introduction of land taxes
The Victorian government expects stamp duty revenue to decrease by around 19% over the following four years. To combat the issue, it is considering offering homebuyers the choice of paying stamp duty in advance or a smaller annual property tax similar to council rates. The latter option would remain with the property even if it is sold.
Reform to slash upfront costs of buying a home
Introducing a system that offers the option of land taxes instead of stamp duty is part of the government’s broader housing affordability package to reduce the upfront costs of buying a home. Under the current system, Victorians pay the most tax per capita compared to other states in Australia. The reform aims to reduce the burden on first-time homebuyers by allowing them to pay a smaller tax.
NSW government scraps former reforms
The Victorian proposal is similar to a system introduced by the former New South Wales government that allowed first homebuyers to switch from paying stamp duty to land taxes. However, the new Labor government in NSW will scrap those changes.
The Victorian government’s potential shift to land taxes from stamp duty would benefit first homebuyers, who are often deterred by the high upfront cost of purchasing property. The government’s broader housing affordability package seeks to alleviate the financial burden on Victorians and reduce the state’s reliance on revenue from the property sector.
1. What is the Victorian government’s plan to combat housing affordability and broaden the state’s tax base?
2. What is the percentage of Victoria’s total tax take raised by stamp duty in the last financial year, and how does it compare to the long-term annual average over the past 25 years?
3. What is the proposed reform being considered by the Victorian government for home buyers, and how does it aim to reduce the upfront costs of buying a home?
4. What is the change introduced by the new Labor government in New South Wales regarding the option to switch from paying stamp duty to land taxes?
5. What is the new policy for first home buyers in New South Wales regarding stamp duty on homes worth up to $800,000 and homes worth up to $1 million?
