The Northern Territory Government should abolish stamp duties and replace them with a broad-based property tax. This could leave Northern Territorians up to $85 million a year better off, while also helping to improve housing affordability. The Government should also abolish grants and stamp duty concessions for first home-buyers.
In this submission to the Northern Territory Government’s Revenue Discussion Paper, Grattan CEO John Daley, Fellow Brendan Coates and Associate Trent Wiltshire argue that these two reforms could improve the Government’s budget position.
Stamp duties are among the most inefficient and inequitable taxes available to the states and territories. In contrast, property taxes – which are levied on the value of property holdings – are the most efficient taxes available to the states and territories. If they are designed well and applied broadly, they do little to change people’s incentives to work, save and invest.
A low-rate, broad-based property levy in the Northern Territory using the council rates base could raise $105 million a year through an annual levy of just $5 for every $1000 of unimproved land value – enough to fund the abolition of stamp duties. Alternatively, replacing stamp duties with a progressive property levy calculated separately for each individual land plot – as the ACT has done – could minimise the windfall gains to larger home-owners from the swap. The Northern Territory Government should ensure asset-rich but income-poor households can stay in their homes, by allowing them to defer paying the levy until they sell their property.
The NT Government should also abolish cash handouts and stamp duty concessions for first home-buyers. These concessions cost the Government $23 million a year. Beyond their sizeable budgetary costs, giveaways to first home-buyers have worsened housing affordability by further inflating demand for housing, with most of the benefit flowing to existing home-owners.