Scrapping stamp duty off the table for debt-laden Victoria, Treasurer Tim Pallas says

Stamp duty is so lucrative to Victoria, scrapping it would blow a hole in the state’s already perilous budget, Treasurer Tim Pallas says.

Treasurer Tim Pallas said scrapping stamp duty would mean cutting health and education services. Picture: Luis Enrique Ascui

Scrapping stamp duty would plunge the state a further $30bn into debt and result in funding cuts to health and education, Victoria’s Treasurer has warned.

As he gears up to hand down his 10th budget, Tim Pallas has refused to rule out making changes to his tax regime.

But Mr Pallas has warned against dumping stamp duty because of the financial boon it provides the state’s bottom line, threatening he’d have to make major cuts to health and education.

Victoria’s net debt is forecast to explode to almost $178bn by 2027, according to a mid-year budget update provided by the government in late 2023.

Outside parliament on Thursday, Mr Pallas said it wasn’t a viable option to scrap stamp duty.

“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,” he said.

“The problem of course with getting rid of stamp duty is not only the massive impact it would have on our budget position but also alternatives to it would require, on our estimate, about $30 billion of increased debt to the state in order to cash flow some sort of land tax alternative.

Stamp duty now accounts for 34 per cent of Victoria’s total taxation revenue.

“Therein lies the problem – the state could not bear that sort of level of debt.”

Mr Pallas said he refused to give a “blanket guarantee” that the state won’t add or increase taxes in the upcoming budget.

“I know that conservatives have consistently promised that they will do exactly that, chisel in granite and never change our tax regime, but I think it’s always worthwhile looking at what more we can do,” he said.

“We’ve looked at it and until we can find a fair and a manageable way of doing it, it just doesn’t appear practical.

“But we’re always open if there is an indication and a willingness from across the political divide to make some decisions in the public’s interest and work together.

In August last year, a parliamentary committee called on the state government to “urgently explore” other state-based options to reform stamp duty.

The Department of Treasury and Finance last year revealed stamp duty now accounts for 34 per cent of the state’s total taxation revenue.

In 2021-22, state coffers reaped $10.4bn off the tax – an increase of more than $8bn compared to 2004-05.

Revenue from the deeply unpopular tax was forecast to drop to $7.4bn in 2023-24 – a 20 per cent decrease, driven due to a decline in people buying homes.

But stamp duty income is set to rise to $9.4bn by 2026-27.

Shadow Treasurer Brad Rowswell said: “I am not surprised in the slightest that Treasurer Pallas doesn’t want to touch stamp duty with a 10-foot barge pole”.

“At a time when they are spending more than any Victorian government has ever spent before, when they’re taxing more than any Victorian government is taxing before … and they’re wasting more than any Victorian government has ever wasted before, no wonder he doesn’t want to touch taxes and make life easier for Victorians,” he said.

“We’ve got to delete wastage from the lexicon of the Victorian public discourse.”

“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.