Victoria's budget bottom line would take a $30 billion hit if the state moves to scrap the state's much-loathed stamp duty, Treasurer Tim Pallas warns.
Subscribe now for unlimited access.
or signup to continue reading
As he prepares to hand down his 10th state budget in May, Mr Pallas has not ruled out changes to the state's tax regime but cautioned against axing stamp duty for homebuyers.
Every dollar raised in Victoria by stamp duty, also known as land transfer duty, costs 55 cents in lost economic activity, according to the Grattan Institute.
The analysis comes after a parliamentary inquiry last year urged the Victorian government to look into scrapping stamp duty and replacing it with a broad-based land tax.
"The $7.3 billion a year I get through stamp duty would probably mean I'd have to seriously cut back our health and education services," Mr Pallas told reporters on Thursday.
"Clearly everyone wants to look at how we can reform and improve the way our tax system operates.
"That's why I've refused to give a blanket guarantee that the state won't change taxes."
Stamp duty poured $10.4 billion into Victoria's coffers in 2021/22, more than a third of state tax revenue.
It was forecast to drop to $7.4 billion this financial year due to falling settlement volumes, stemming from higher borrowing costs, before rising to $9.4 billion by 2026/27.
"The problem of course with getting rid of stamp duty is not only the massive impact it would have on our budget position," Mr Pallas said.
"But also alternatives to it would require, on our estimate, about $30 billion of increased debt to the state in order to cashflow some sort of land-tax alternative.
"Therein lies the problem. The state could not bear that sort of level of debt. We've looked at it and until we can find a fair and a management way of doing it, it just doesn't appear practical."
A budget update in December revealed Victoria's net debt was forecast to climb to $177.8 billion by June 2027, $6.4 billion higher than estimated in May.
The Victorian government remains open to discussing tax reform ideas with the coalition and Greens, Mr Pallas said.
Shadow Treasurer Brad Rowswell said he wasn't surprised Mr Pallas didn't want to touch stamp duty "with a 10-foot barge pole".
"By their own numbers they're expecting stamp duty revenue in this state to increase by $2 billion over the forward estimates," he said.
"Housing is unaffordable. Renting availability is a real issue in this state and it's no wonder because this Labor government is so addicted to property taxes."
Australian Associated Press
