NSW, Victoria push to replace stamp duty
Tom Burton Government editor
NSW and Victoria governments are pushing for abolition of stamp duty and replacement with an annual land tax as part of broad fiscal reforms to fund the economic fallout from the COVID-19 shutdown.
The bipartisan push to get federalstate fiscal relations back on the reform table comes as Prime Minister Scott Morrison has signalled major changes will be needed to ensure job and income growth.
State ministers believe the new collegiality between Canberra and the states – through the national cabinetcould be the opportunity to finally break through reluctance to reform the revenue imbalance between the states and the Commonwealth.
Victorian Treasurer Tim Pallas on Thursday called out state financing as a key part of broader economic reforms that will be necessary to resuscitate the economy. His comments came as the Victorian government looks to set up a loan facility worth $24.5 billion to fund recovery projects and programs.
‘‘We will be reforming the way the economy operates, make no mistake about that. We have to do it, the future demands it, Mr Pallas said. ‘‘The way the states derive income needs to be reformed.’’
The NSW government is also looking to reform stamp duty as part of a major federal financial review panel was commissioned last year by NSW Treasurer Dominic Perrottet and includes former New Zealand Prime Minister Bill English and former federal Finance secretary Jane Halton.
Ms Halton is part of Neville Power’s COVID-19 commission making recommendations to the national cabinet on the recovery plan.
The distribution of GST would need to be adjusted to cover the transition. Canberra has shown little appetite for any special coronavirus levy or an increase in the GST.
GST revenues are weakening due to price pressures on retail goods and an increasing spend on GST-free services, such as healthcare.
State officials also point out Commonwealth revenues will continue to be under pressure, with fuel levies likely to fall with the uptake of electric cars and company income tax revenues impacted by capital mobility and international tax competition.
Weakening Commonwealth revenues would flow through to lower grant funding to the states.
NSW has estimated the gap between revenue and expenditure will grow to 3.4 per cent of gross state product by 2056, equivalent to $20.6 billion or a fifth of revenues.
The issue of stamp duty has dominated the NSW review.
‘‘Stamp duty on residential properties are particularly costly as they add to the cost of buying a house and therefore discourage people from downsizing, or moving closer to preferred jobs, schools and family,’’ the NSW discussion paper said.
The review consistently heard how transfer duty is a costly tax that impacts citizens’ freedom to move throughout the seasons of life.
‘‘We also heard how it can often have the worst impact on first home buyers and seniors. By hindering mobility, we heard stories of people living in housing that doesn’t meet their current needs.’’
A 2017 NSW Treasury report estimated stamp duty abolition would lead to a 25 per cent increase in property transfers, creating the equivalent of an extra 70,000 homes.