Infrastructure Victoria has released its latest strategy report, calling for a reform of stamp duty in the state. The advisory body regularly updates its “30-year infrastructure strategy” report to provide a practical plan for policies, reforms, and projects that will benefit Victoria’s communities in the coming decades.
Stamp duty is a tax on the transfer of land ownership, and currently, buyers in Victoria have to pay this tax when purchasing a home. Infrastructure Victoria argues that stamp duty discourages people from moving into different homes as their lives change and pushes them to commit to purchasing larger “forever homes.” This has led to the need for infrastructure development in new suburbs, which is often more expensive than in established suburbs.
The advisory body suggests that by phasing out stamp duty on residential properties over time, the government can reduce infrastructure costs and improve economic productivity. Removing stamp duty would also reduce the upfront tax on buying a home, allowing home buyers to find a house that suits their current needs. It would also make it easier for people to move to locations with available jobs, benefiting businesses’ staff recruitment and contributing to greater economic productivity.
Infrastructure Victoria recommends transitioning from stamp duty to a land tax, which would provide a steadier revenue stream for the government as it would change yearly based on land value. The report suggests that the government expand land tax to cover all residential properties to compensate for the tax revenue lost from stamp duty.
The report highlights the success of the ACT government’s tax reform scheme, which reduces stamp rates while increasing land taxes over a 20-year period. Infrastructure Victoria sees this as a good model for the Victorian government to consider.
The estimated cost of shifting from stamp duty to land tax in Victoria is between $1 million to $5 million, which could be funded by general government revenue. This cost includes developing a legislative impact assessment, consulting with stakeholders, and amending and adopting new legislation. The advisory body believes that existing government staff can handle the necessary expansion of government systems for residential land tax collection.
The CEO of the Real Estate Institute of Victoria (REIV), Kelly Ryan, supports the removal of stamp duty, describing it as an inefficient tax that restricts investment and mobility in Victoria’s property market. The REIV calls on the Victorian government to conduct a comprehensive review of the property taxation system in collaboration with sector stakeholders and experts.
Overall, Infrastructure Victoria’s strategy report highlights the negative impacts of stamp duty on housing affordability and proposes a shift to land tax as a more efficient and beneficial alternative. By implementing these reforms, the government can reduce infrastructure costs, improve economic productivity, and provide greater flexibility for home buyers.
