An annual land tax that could potentially replay stamp duty has been criticised by the property industry.
Property Council of Australia chief executive Ken Morrison said he welcomed possible government plans to scrap stamp duty, which he called “Australia’s least efficient and most unpopular tax”, but a shift to an annual tax could be complicated and costly for families.
“In modelling for the Property Council, Deloitte Access Economics estimated that the average ‘land value property’ would need to pay $2400 a year,” he said.
“However, this is an Australian average. Different underlying land values would produce very different tax outcomes with many suburbs paying $5000 a year or more.”
An overall increase in the GST was recommended by the industry body as an alternative option to stamp duty.
Advantage Property Consulting director Frank Valentic said the change would be “replacing one bad tax with another”.
“Victorians are already among the highest taxed property owners,” Mr. Valentic said.
“It could really be hitting people with a double whammy if forced to pay another tax on top of rising council rates and other levies every year.”
He said low-income earners and retirees would struggle to pay thousands of dollars in added tax each year.
But the change could also lead to a spike in the number of properties hitting the market.
“A lot of older people have previously put off downsizing because of prohibitive costs of selling like stamp duty … they may now decide to sell,” he said.
“Some investors may also decide to sell if there are too many annual fees to pay on a large property portfolio.”
Real Estate Institute of Victoria president Leah Calnan said the body would “not be in favour of the government introducing any additional taxes to property owners in the state”.
“We already have 19 taxes that are payable through the property sector, which contribute to 48 per cent of the state’s income,” Ms Calnan said.
“We’ve been speaking with the government for many years in regards to reducing stamp duty calculations, because Victoria has some of the highest rates across the country.”
She said a removal of stamp duty would encourage people to transact more frequently.
Real estate agents including Samuel Property director Illan Samuel said real estate activity could spike after coronavirus if the changes were made.
Ray White Mt Waverley director Jay Warnak said it was important the government found a way to be “equitable” with the tax.
Previous estimates suggest the reform could grow the national economy by $20 billion.
Stamp duty and land tax — the latter now paid only on commercial properties and investment homes — was forecast to bring $9.5 billion into Victoria’s coffers this year, about 40 per cent of the state’s total tax take.
But the pandemic is tipped to send property prices tumbling 9 per cent, blowing a hole in stamp duty as sales volumes also fall.
A property market slowdown, which eased late last year, had already blown a $5.2 billion hole in stamp duty revenue, highlighting its volatility.