The Victorian Government is looking at a new proposal to replace stamp duty with an opt-in annual land tax.
Under the scheme, stamp duty would be gradually replaced by an annual land tax where home buyers have the choice to opt in to a new property system or receive credit for past duties.
A $1 million home in our State currently attracts stamp duty of $55,000.
New South Wales is also looking at the proposal and John Freebairn, an economist and part of a review being sent to the Treasurer in that State this week, said stamp duty was unfair tax that needed to be replaced with a property tax based on the value of unimproved land.
“With stamp duty someone who moves every five years because of changing jobs contributes a hell of a lot to health and education,” he told Australian Financial Review.
“Someone who sits in the same house forever contributes nothing.”
The two treasurers in Victoria and New South Wales are in talks with the aim of breaking the dependence on stamp duty which is worth $20 billion to the States and Territories annually and it comes off the back of Scott Morrison scrapping COAG last week.
One of the stamp duty proposals is to give future property purchasers, including first-time buyers, the right to choose between the huge one-off upfront cost of stamp duty or to opt in to paying an annual land tax of a few thousand dollars.
If you are a home owner who paid stamp duty that would be grandfathered under the system.
PwC tax partner Paul Abbey said governments were too reliant on inefficient taxes.
“The only way we are going to get the public across the line is to give them choice between land tax and stamp duty,” he told AFR.
“You need to marry ‘opt in’ with allowing states to convert the future land tax streams into revenue – to borrow through securitisation to smooth their budget revenue out of the stamp duty.”
The other option being looked at is to move faster towards an annual land tax system paid by everyone.