The Victorian Government is reportedly considering scrapping stamp duty payments for new homeowners in favour of annual land tax payments.The coronavirus pandemic has had a substantial impact on the real estate market, and reports have suggested the Government is considering the reform to improve affordability and assist in the state’s economic recovery, according to The Herald Sun.
Stamp duty is paid after buying a house or business, and the amount paid depends on what state you live in.
In Victoria, homeowners who pay $680,000 for a home have to come up with a further $35,870 in stamp duty. In NSW, homeowners buying for the same amount have to pay $26,032 in stamp duty. In Queensland, the stamp duty on a home of the same price is $16,450.
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The Federal Government is reportedly considering a plan to dump the stamp duty tax in favour of annually taxing homeowners. The tax would be calculated on the value and size of their land. The shift to a new annual tax system is being “actively considered”, according to the report.
The new system would come into effect over the long term to ensure homeowners who’ve already paid stamp duty aren’t taxed twice. The plan could also lean on the Commonwealth to assist as the states suffer a short-term fall in revenue from the taxes.
Dumping the tax on new homebuyers was a key recommendation from a report by the Productivity Commission in 2019. It urged the Federal Government to dump the stamp duty scheme, calling it inefficient.
The idea was previously rejected by the Morrison Government but is now reportedly being considered as key reform to improve the slowdown in the housing market caused by the coronavirus pandemic.
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The reform would remove significant upfront costs for potential new homebuyers and encourage the sale of land properties.
One minister called it “bigger than the GST” in terms of how large of a shift it signalled for the Government.
Previous government estimates suggest such a reform could have the impact of growing the economy by $20 billion.
Stamp duty is also paid on other purchases including insurance policies, mortgages, vehicle registrations and some share transfers.
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