Removing stamp duty would increase housing mobility, lead to more efficient use of the nation’s housing stock, and reduce state and territory revenue volatility, according to a new research paper by the National Housing Finance and Investment Corporation (NHFIC).
Released today, Stamp Duty Reform: Benefits and Challenges draws on the most recent data to assess the benefits and reform considerations when phasing out stamp duty in favour of a broad-based land tax.
Families across all states and territories, except the ACT, are paying substantially more stamp duty when they move house than they were 20 years ago which is hindering mobility and the efficient use of the housing stock, according to the research paper.
The paper also explores how replacing stamp duty with a broad-based land tax in all states and territories would help improve economic efficiency, and that a shorter phase in period could help limit the impact of house price growth on the cost of the transition. The aim of transitioning from stamp duty to land tax is not to increase revenue per se, and the paper demonstrates that the transition can be achieved in a revenue neutral way.
Key findings and highlights include:
NHFIC CEO Nathan Dal Bon said the paper highlights the importance of housing tax policy design and the benefits of a broad-based land tax over stamp duty in improving housing outcomes.
“Encouraging more household mobility through reductions in stamp duty leads to more efficient use of the housing stock which means people can better ‘right-size’ their own housing arrangements in line with their individual preferences.”
“Households that are considering downsizing and upsizing, or just seeking more space when they are working at home during COVID-19 wouldn't be penalised under a broad-based land tax compared with the current stamp duty arrangements across most states,” Mr Dal Bon added.
The paper also considers a range of options available to policy makers to help speed up any transition and address equity issues raised as part of the reform, including crediting back households that recently paid duty and allowing asset rich, cash poor retirees to defer their land tax liabilities until their property is sold.
Encouraging more household mobility through reductions in stamp duty leads to more efficient use of the housing stock which means people can better ‘right-size’ their own housing arrangements in line with their individual preferences.
NHFIC Chief Executive Nathan Dal Bon