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Experts say there is only a slim chance the state will follow the lead of NSW and reform the “inefficient tax”.
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Accountants predict Victorian stamp duty review doomed to failure
16 March 2023
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10 minute read
Accountants believe Victoria will fail to follow the lead of NSW on stamp duty despite a parliamentary inquiry into the matter.
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HLB Mann Judd tax consulting partner Josh Chye said he was pleased to see scrutiny of the tax but the precarious state of the Victorian government’s budget made changes unlikely.
“The Victorian government’s establishment of a committee to review the stamp duty regime is welcomed, albeit well overdue given the issue was raised as a key issue in the 2008 Henry Tax Review,” said Mr Chye.
“It is clear wholesale reform is required given stamp duty is a highly inefficient tax, reducing transactions in the housing market and imposing barriers for new home owners and families to get into and move homes as their life and family needs changes.”
He said stamp duty was crucial for the Victorian government as it accounted for approximately 27 per cent of its revenue, with the state’s budget deficit the worst in the country at about $162 billion.
“A key concern would be any removal of stamp duty will result in new or broadening of existing taxes that does not achieve the goal of improving labour and capital mobility and housing supply and development.”
Indirect tax partner at BDO Michelle Bennett was hopeful of change after declaring that almost no tax experts would consider stamp duty as a good tax.
“By good tax we usually mean it is simple to understand, efficient to collect, hard to avoid, doesn’t distort behaviour and applies in a way that is perceived as fair,” said Ms Bennett.
“Stamp duty on land is efficient only in the sense that the taxable transactions are relatively easy to identify and relatively hard to avoid as there is an asset that can secure the liability. This is why governments are so attached to it.”
“However, it is rarely perceived as fair and is widely regarded as distortive – affecting the willingness of people in Australia to change their housing even as their needs and opportunities change over their lives – undermining any other efficiencies.”
Sam Mohammad, partner and national indirect tax leader at RSM Australia, held a pessimistic view despite agreeing that a review was required.
“The chances of any real reforms to land transfer duty arising from the current Victorian parliamentary inquiry are slim,” said Mr Mohammad.
“The NSW experience demonstrated how difficult transfer duty reform is even when a major political party in power has the will to institute change.”
“The current Victorian parliamentary inquiry into land transfer duty was not initiated by the current Andrews government, therefore it is highly unlikely the Andrews government will adopt any of the recommendations that emerge from the six-month inquiry.”
CPA Australia senior manager of tax policy Elinor Kasapidis said the association encouraged stamp duty reform for not only Victoria but nationally.
“There is a widespread agreement among tax experts and professionals that stamp duty should be replaced with a smaller, annual fee for all home buyers,” said Ms Kasapidis.
“We’re eager to see more home buyers given the ability to opt out of stamp duty in the future. We’re glad the Victorian government is reviewing stamp duty arrangements.”
“We want a widespread national transition away from stamp duty. CPA Australia has been encouraging federal, state and territory governments to discuss stamp duty, GST and payroll tax reform.”
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