The Real Estate Institute of Victoria (REIV) has urged policymakers to do away with “lazy” taxes like stamp duty and find a more effective solution such as a land tax.
In its response to Victoria’s Parliamentary Inquiry into Land Transfer Duty Fees, REIV has suggested a broad-based tax will avoid inefficient and disproportionate effects of house price bracket creep, as well as provide a more stable and predictable revenue stream for government.
The peak body has reiterated the financial pressure that comes with the tax impacts decisions regarding relocation for employment, personal preference, and downsizing or upsizing based on housing requirements.
REIV Chief Executive Officer Quentin Killian said he was concerned about the current state of property taxes in Victoria, stating that they are unfair, untenable in the long-term, and negatively impact the property market.
Mr Killian said there needs to be a conversation between governments and industry stakeholders to find alternative solutions.
“Stamp duty has created an excessive burden on home buyers for far too long, with fees for the median priced house currently sitting at approximately 48.9 per cent of Victorian’s average annual income,” he said.
“What we’re trying to say is that we don’t actually have the answer to what the exact nature of a broad-based tax would look like – but we need that conversation.”
He said stamp duty and windfall gains tax are “lazy taxes” that are too dependent on market conditions, making them difficult to budget against.
Mr Kilian said removing stamp duty would allow for a more sustainable market environment and encourage activity, benefitting the economy.
“Recent economic fluctuations, such as limitations on real estate activity during Covid and increases in interest rates, influence individual decisions to engage or not engage with housing markets, further impacting government revenue,” he said.
The REIV’s submission said stamp duty increases the cost of moving and people may choose to remain where they are rather than pursue job opportunities elsewhere – contributing to the lack of skilled labourers in areas of need, as well as negatively effecting productivity.
Mr Killian said he was not suggesting the government scrap these taxes altogether, but find an alternative that doesn’t disincentivise homebuyers and investors or contribute to the ongoing rental crisis, which is driven by a lack of supply.
“We’re not suggesting in any way, shape, or form that the government’s just scrap the taxes because that’s going to give up the best part of $12-14 billion worth of revenue each year,” he said.
“But there needs to be some better way that does not disincentivise people buying homes or investors coming into the market.”
Mr Killian said taxes like stamp duty affect everyone, including renters, who may end up paying higher rents due to increased taxes on their landlords.
According to Mr Killian, one alternative proposed by the Real Estate Institute of Australia (REIA) involves broadening the GST and increasing it by 1.5 per cent, which could generate enough revenue for every Australian state to completely do away with stamp duty and land taxes.
“That may not be the correct answer, but it’s an example of the thinking that says, ‘why do we have to stick with the old ways of doing things’,” he said.
“Maybe it’s time to step outside of that mindset and shake things up.”
