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Stamp duties, land tax and housing affordability: The case for reform

Published on 01 Apr 12 by "AUSTRALIAN TAX FORUM" JOURNAL ARTICLE

House prices and rents have increased ahead of average earnings over the last 25 years tipping more and more Australian households into housing affordability stress. The deterioration in housing affordability is in part due to a set of Federal and State tax arrangements that distort the use of land and buildings in ways that impair the efficient operation of housing markets. State government taxation of residential land and buildings in the form of stamp duties and land taxes are an important influence because they offer preferential treatment to land and buildings that are owner occupied.

This paper analyses the case for reform, and assesses what impact their introduction would have upon land prices based on modelling of the Melbourne
housing market. We argue that there is a compelling case for the abolition of stamp duties and their replacement by a broad-based land tax. Furthermore transitional arrangements are put forward that would gradually introduce the reforms such that no existing home owner would pay land tax if they had already paid stamp duty when purchasing their home. These arrangements would aid the introduction of reform by ensuring that no property owner must meet an additional tax.

Author profiles:

Ian Winter
Ian works for Australian Housing and Urban Research Institute.
Current at 1 April 2012

 
Rachel Ong
Rachel works for School of Economics and Finance, Curtin University.
Current at 1 April 2012


Gavin Wood
Gavin works for School of Global Studies, Social Sciences and Planning, RMIT University.
Current at 1 April 2012
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