Stamp duty is the second-largest source of revenue for state governments, but it make states more vulnerable in the event of a housing downturn, the Housing Industry Association (HIA) said.
State governments could have a more reliable source of revenue by replacing stamp duty with a more predictable and equitable tax, according to HIA Chief Economist Tim Reardon.
“State governments have become increasingly dependent on stamp duty revenues. Stamp duty is an unreliable source of revenue and the increased dependence makes states heavily susceptible to housing market downturns,” said Reardon.
HIA’s Stamp Duty Watch report predicted the downturn in the New South Wales market to cost $10.6bn in lost revenue over the forward estimates. The report also found that in Victoria, where the decline in house prices was modest, revenue from stamp duty fell by $5.2bn.
“This sharp drop in revenues highlights the vulnerability of state budgets,” said Reardon.
In 2018/19, stamp duty revenues covered over on three-fifth of all taxation revenue raised in NSW, Victoria, Queensland, and Tasmania, according to the data.
“Alternative broad-based tax measures could deliver a more consistent and reliable revenue stream,” Reardon said.
The Real Estate Institute of West Australia (REIWA) also called for the abolishment of stamp duty, replacing it with an annual land tax.
“Stamp duty presents a significant hurdle for first homebuyers, trade-up buyers, and downsizers throughout their property journey, impacting immensely on affordability,” said REIWA President Damian Collins.