Property tax reform is gathering momentum. The NSW government recently published a progress paper providing more detail about its reform intentions including the results of its public consultation process. The next step for NSW is to assess feedback on the progress paper and provide an update later in the year. It now joins the ACT as the only two jurisdictions in Australia intent on replacing transfer (stamp) duty with land tax.
Against this backdrop it is timely to take a step back and reassess the economic benefits and challenges of transfer duty reform using the most recently available data. The report also discusses the equity distortions created by transfer duty and why they are an important consideration.
This report highlights the distortions that transfer duty imposes on mobility and prices in the housing market. It also discusses the challenges faced by jurisdictions wanting to phase it out in preference of a broad-based land tax using a model that analyses the link between dwelling prices, the number of transfers and transfer duty revenue.
Mobility will increase if transfer duty is reduced or removed.
States and territories with the highest effective rate of transfer duty have the most to gain from reform.
Jurisdictions wanting to reform their property tax regime by replacing duty with a broad-based land tax face several challenges.
A range of options are available to policy makers to help speed up any transition and to help address equity issues raised as part of the reform.
 The analysis in this paper is primarily focused on residential property.