Australia property tax debate highlights stamp duty reform potential

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Highlights

e61 Institute estimates removing stamp duty in New South Wales could generate 100,000 additional home purchases annually and 90,000 more in Victoria.
NSW Treasury's 2022 report projects replacing stamp duty with a land value tax could increase home ownership by 6.6 per cent long term and create steadier revenue.
Victorians paid $12 billion to move homes in 2022-23, with $9 billion of that in stamp duty, adding approximately $40,000 to the cost of an average home purchase.

Research and reform proposals gain attention

As reported by ABC News, economists and housing experts say stamp duty distorts property decisions by discouraging people from moving, adding to costs for buyers and limiting activity across the housing market.

Nick Garvin, an economist at the e61 Institute, says stamp duty is not a neutral tax because it changes behaviour. Research from the institute found housing purchases declined after Queensland increased stamp duty in 2011 by about one percentage point, and it estimates removing the tax in New South Wales could lead to about 100,000 more home purchases a year, while Victoria could see about 90,000 more.

Garvin says an ongoing land value tax would be harder to avoid and would not have the same effect on mobility. 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, while also producing steadier revenue than the more volatile transaction-based tax.

Housing market and policy implications

Comparisons with overseas systems are adding to the debate over how property should be taxed. New Zealand does not charge stamp duty, although it has a higher 15 per cent GST compared with Australia's 10 per cent, and Grattan Institute housing expert Matthew Bowes says the absence of a tax on moving into new homes may be one factor supporting more townhouse and apartment construction alongside planning reform.

The U.S. uses similar transaction taxes only in some states, while Canada has a land transfer tax and the UK Conservative Party has pledged to abolish stamp duty on primary homes. London School of Economics housing expert Kath Scanlon says abolishing the tax would stimulate the housing market, but warns that property taxation still has a role if it is designed well, particularly because replacing lost revenue through spending cuts could be problematic.

In Australia, the ACT remains the clearest example of a shift away from stamp duty after announcing reforms in 2012 to replace it over 20 years and abolishing it for first-home buyers in July. Victoria University researchers found the ACT's changes have raised economic activity by about 80 per cent and increased property transactions, while separate figures cited in the report show Victorians paid $12 billion to move homes in 2022-23, including $9 billion in stamp duty, adding about $40,000 to the cost of an average home purchase.

Bowes says a universal land value tax would better encourage development of under-used land, but he also notes the politics remain difficult because buyers may perceive a large one-off payment at purchase as less painful than recurring charges over time.

Our earlier article on the National Housing Expo in Pasay City outlined how Philippine housing agencies and partner developers are expanding access to affordable homes through a two-day event offering around 50,000 units. It also detailed Pag-IBIG Fund financing support under the Expanded 4PH Program, including higher loan limits, subsidized rates for socialized housing, and promotional rates aimed at improving homeownership affordability for qualified members.

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