02 May 2010
What the report says …
Existing State stamp duties on property conveyancing are highly inefficient, distorting both residential and business use of property. Conveyance stamp duty is highly inefficient and inequitable. It discourages transactions of commercial and residential property and, through this, its allocation to its most valuable use.
Stamp duties on conveyances are inconsistent with the needs of a modern tax system. While a significant source of State tax revenue, they are volatile and highly inefficient and should be replaced with a more efficient means of raising revenue.
Stamp duty encourages people to stay in houses when they would prefer to move, contributing to longer commuting times, larger average home sizes and lower labour mobility.
While around half of owner-occupiers have occupied their house for nine years or less, 18 per cent of owners have bought within three years and 26 per cent stay in their home for at least 20 years. People who have to move more frequently because of their work or large changes in their life (for example, birth of children, divorce, or a new partner) will face higher rates of tax, regardless of their means. This suggests that current rates of stamp duty prevent a substantial number of mutually beneficial housing exchanges.
Stamp duties also directly reduce access to housing for people who are credit-constrained.
What the Urban Taskforce says …
The admission that existing state stamp duties on property conveyancing are highly inefficient and that they distort both residential and business use of property was inevitable.
The next step is for state and federal government to actually do something about it. They can start by limiting stamp duty to land value only when off-the-plan sales contracts are entered into. This has worked in Victoria and would help reduce distortions across the rest of the country too.