The Victorian premier, Daniel Andrews, has rebuffed calls to scrap stamp duty in favour of a broad-based land tax in Victoria, but flagged changes to planning laws in an effort to boost housing supply.
Stamp duty is now being examined by the Department of Treasury and Finance as well as by a parliamentary inquiry, chaired by non-government MPs. Experts told the inquiry last week that the tax is deepening the state’s housing affordability crisis.
But Andrews said he was “unconvinced” that replacing stamp duty with an opt-in land tax – similar to the system operating in New South Wales – will benefit Victorians.
“I’m not entirely certain that it is everything that people make it out to be. You had a policy decision made in NSW, then when it got implemented it went from being a compulsory scheme with all these macro benefits … [to] an optional scheme,” Andrews told reporters on Tuesday.
“I don’t know they necessarily get all of that aggregated benefit if it’s not happening everywhere.”
The NSW Labor government has committed to repealing the annual land tax. However, the Victorian opposition and state Greens MPs said they are open to supporting abolishing stamp duty in favour of such a tax.
Andrews said while “everybody would like to pay less stamp duty”, it helps fund essential public services, including wages for teachers, nurses and police.
“It’s not quite as easy as, ‘We don’t like that particular revenue measure, let’s just get rid of it,’” he said.
According to a pre-election budget update the government will collect an annual average of $8.4bn in stamp duty over the next four years, down on the record $10.4bn haul it received in 2021/22.
The budget update warned revenue from stamp duty and land tax was subject to “unique risks and historically has been volatile”, due to the fluctuations of the housing market.
The parliamentary inquiry last week heard from experts who said stamp duty was inefficient and an unstable source of revenue for state.
The Grattan Institute’s economic policy program director, Brendan Coates, said in a submission that stamp duty “penalise[s] young people” and is a “de facto tax on divorce” that is particularly hurting separated women.
He argued replacing it with general property taxes could “make Victoria up to $5bn a year better off while also improving housing affordability”.
Matthew Kandelaars, from the Urban Development Institute of Australia, wrote that couples with no children on a moderate income “cannot feasibly purchase a median property in metropolitan Melbourne”.
“The cost of housing, including the added cost of land transfer duties, partnered with a historic lack of supply, has pushed potential first home buyers out of the housing market and back into the rental market,” he wrote.
In Victoria, first home buyers currently receive an exemption from stamp duty for properties valued under $600,000 and a reduced rate charged for properties worth up to $750,000.
From July, the NSW government will lift its stamp duty exemptions to include first home buyers who purchase properties for under $800,000.
Andrews would not say whether Victoria would increase its exemption to properties worth more than $600,000, but said further support for first home buyers would in next week’s state budget.
He also flagged reform to the planning laws, to be introduced later this year, to boost housing supply.
This could include introducing incentives for developer to “embed affordable housing in each of the new developments that they make”.
“More housing means lower prices,” he said.
“It’s really hard to plan for the future … if you’re not in a position to be able to secure housing at a reasonable price proximate to where you would like to live.”
Andrews also announced a review of the Domestic Building Contracts Act to ensure Victorians building homes are better protected, after the Porter Davis collapse.
