Whether it is bidding at an auction or buying at a private sale, most people purchasing property in Australia will pay one of the world's oldest taxes, stamp duty.
asserted
people → bid → taxes
But research suggests shifting away from the more than 300-year-old tax on property transactions could ease housing affordability and help boost economic activity.
uncertain
shifting → suggest → activity
Across the country, all jurisdictions have stamp duty, with only the ACT planning to phase the tax out over a 20-year period.
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ACT → have → period
e61 Institute economist Nick Garvin said stamp duty was not a neutral tax because it dis-incentivised people from moving.
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it → say → people
"An ideal tax is one that is neutral in the incentives that it generates.
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it → generate → that
So basically it doesn't change people's behaviour," Dr Garvin said.
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Garvin → change → behaviour
Removing stamp duty could increase home ownership
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Removing → remove → ownership
According to research from the e61 Institute, stamp duty has a direct impact on housing transactions.
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duty → accord → transactions
The research found that after Queensland increased stamp duty in 2011 by about one percentage point, housing purchases declined.
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purchases → find → point
It estimated removing stamp duty in New South Wales could result in about 100,000 more home purchases per year, while in Victoria it could be about 90,000.
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it → estimate → Victoria
Dr Garvin said a solution would be to move to an ongoing land value tax because it was difficult to dodge and it did not affect people's behaviour, unlike stamp duty.
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it → say → duty
A 2022 NSW Treasury report found replacing stamp duty with a land value tax could increase home ownership in the state by about 6.6 per cent in the long term.
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replacing → find → term
"If people want to own a home or own the land that a business is built on, there's no way to avoid paying the tax,"he said.
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business → want → that
"Another benefit is it generates less volatility in government revenue.
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it → generate → revenue
"
How does Australia compare to other places?
Across the ditch, New Zealand does not charge stamp duty; however, its GST is higher at 15 per cent, compared with Australia's 10 per cent.
Grattan Institute housing expert Matthew Bowes said it could be one factor that explained why planning reform in New Zealand had facilitated more townhouse and apartment building.
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reform → compare → building
"They don't have a tax on people moving into new homes that we have here," Mr Bowes said.
"
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Bowes → have → that
I think it is part of what clogs up our housing market and stops people taking up these opportunities created by the planning reforms we've seen in Melbourne and Sydney."
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we → think → Melbourne
The United States has a similar tax to stamp duty called mortgage tax in eight states, and a "mansion tax" in seven states which only affects properties sold above a certain price.
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which → have → price
Neighbouring Canada has a land transfer tax, which is similar to stamp duty.
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which → neighbour → duty
The United Kingdom's Conservative Party has committed to abolishing stamp duty on the primary home.
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Party → commit → home
"So this is my guarantee: no stamp duty when you buy your home," Conservative leader Kemi Badenoch has said.
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Badenoch → buy → home
But the UK does not regularly update its housing valuations, so introducing an ongoing land tax would be difficult, according to London School of Economics housing expert Kath Scanlon.
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introducing → update → Scanlon
Under the Conservative policy, the revenue lost by abolishing stamp duty would be mitigated by making cuts to spending, something Ms Scanlon cautioned against.
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Scanlon → lose → spending
"Abolition of stamp duty would definitely stimulate the housing market, but there are good reasons for having some taxation of property, if well designed," she said.
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she → stimulate → property
The only place in Australia planning to abolish stamp duty
In 2012, the ACT government announced a series of tax reforms including plans to replace stamp duty with a land value tax over a 20-year period, and in July it abolished it for first home buyers.
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it → plan → buyers
Researchers from Victoria University found changes the government had made since 2012 to being phasing out the tax had raised economic activity by about 80 per cent, and also increased property transactions in the ACT.
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government → find → ACT
They also found that in the 2022-23 financial year, people in Victoria paid $12 billion to move homes, with $9 billion going to stamp duty.
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billion → find → duty
It meant Victorians moving house paid an effective tax rate of 300 per cent, which added $40,000 to the cost of purchasing an average home.
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which → mean → home
Mr Bowes said a universal land value tax was better for the economy because it incentivised the development of under-utilised land.
"
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it → say → land
If there's valuable land people are sitting on, making them pay a tax for sitting on it increases the probability places [with] good land that should be used are developed," he said.
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he → be → land
But Mr Bowes said despite the advantages, a land tax could be seen as less politically popular.
uncertain
tax → say → advantages
"In the context of that purchase, spending $50,000 or whatever large amount on stamp duty doesn't feel as costly as, say, getting a rates notice for a similar amount over a couple of years," he said.
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he → spend → years
"So the challenge is that it's incredibly convenient for governments to tax us at a point in time when we are prepared to spend the money, even if that has downsides in terms of its economic implications."
asserted
that → tax → implications
The Aporia