The numbers tell two stories that shouldn’t sit together. State and territory governments pulled $34.4 billion from property taxes in the most recent financial year, stamp duty alone, nothing else, while construction firms filed for insolvency at a pace that saw more than 7,700 developers go under nationally in the past 24 months. In NSW, 1,500 building companies collapsed in the last financial year.
Those figures create a policy bind. The entities tasked with delivering new housing supply are failing at an accelerating rate, while the governments setting supply targets are simultaneously extracting record revenue from the property market. The incentive structure points in opposite directions.
How the tax base grew while the industry contracted
Property tax hasn’t just held steady as a revenue line, it expanded. NSW stamp duty collections climbed from $12.4 billion in 2023-24 to $14.3 billion in 2025-26. The state’s 2014 budget surplus of $2.9 billion was underpinned by $7.2 billion in stamp duty during Sydney’s first major price cycle in a decade. Remove that line item and the surplus flips to deficit.
The national total has sat around $30 billion annually since the pandemic, trending upward even as transaction volumes softened and builder margins compressed. That revenue stream is now load-bearing for state budgets.
Meanwhile, the supply side is shrinking. Developer insolvencies don’t pause construction projects temporarily, they erase capacity. Subcontractors, materials orders, finance arrangements and site approvals all reset to zero. Each collapse removes not just one project but the pipeline behind it.
The tax layer problem
The development pathway carries multiple tax hits at different stages. GST applies to construction inputs. Developer contributions and betterment levies front-load infrastructure costs. Stamp duty hits the buyer at settlement. Land tax accrues annually. Capital gains tax applies on disposal. Foreign investor surcharges add another margin hit where applicable. Vacancy and absence taxes penalise holding costs. Rental income faces income tax. Trusts, a common structure for family and mid-tier developers, now face a proposed 30 per cent minimum rate.
Each levy is defensible in isolation. Stacked together, they compress the return on equity to a point where marginal projects don’t proceed. When margins sit in low single digits and interest rates have doubled, the tax stack determines whether a development clears its hurdle rate.
Governments haven’t created new housing-specific taxes recently, they’ve mostly recalibrated existing ones and proposed removing offsets like negative gearing or the CGT discount that previously made the arithmetic work. The cumulative load is what matters.
What this means for Housing Accord targets
The national Housing Accord commits to 1.2 million new homes over five years. That target requires builders to survive, scale and maintain throughput. Insolvency rates moving in the opposite direction to revenue extraction creates a structural contradiction.
Supply doesn’t respond to grants, guarantees or buyer incentives when the entities delivering that supply are insolvent. First-home buyer programs push demand into a market where the construction firms needed to absorb that demand are collapsing faster than they’re forming.
The revenue dependency is the trap. Stamp duty fluctuates with transaction volumes and prices, but it’s large enough that removing or cutting it would require replacing billions in baseline funding for hospitals, schools and infrastructure. That makes reform politically expensive even when the policy case is clear.
The catch
- NSW stamp duty revenue: $14.3bn in 2025-26, up from $12.4bn the prior year
- National property tax total: $34.4bn annually
- Builder insolvencies: 7,700+ nationally over two years; 1,500 in NSW alone in the last financial year
- The revenue surge funds state services, making tax cuts structurally difficult even as the supply side contracts
The scenarios that could shift settings
Base case: tax settings hold, insolvencies continue, supply undershoots targets, prices and rents stay elevated. Governments maintain revenue, housing goals slip further behind.
Upside: a state moves first on stamp duty reform, likely replacing it with a broad-based land tax, and construction activity responds within 12-18 months as holding costs and transaction friction both fall. Other jurisdictions follow.
Downside: insolvency rates accelerate, major mid-tier developers exit, supply craters, and governments respond with demand-side stimulus (more grants, looser lending) that inflates prices without adding homes.
The upside requires a state to absorb a revenue hole during the transition, which is why it hasn’t happened yet.
What to watch in the next four to six months
Insolvency filings in Queensland and Victoria, both states with large development pipelines and rising land tax burdens. If the pattern spreads beyond NSW, the supply impact compounds.
Any state budget that flags stamp duty reform or land tax restructuring. NSW has floated transitions before; the question is whether political will aligns with fiscal room to move.
Developer lobbing around the trust tax proposal. If that minimum rate proceeds, watch for mid-tier family developers scaling back or exiting, they’re the segment that typically builds townhouses and small apartment blocks, not the large institutional players.
Construction cost data: if input prices stabilise or fall (see recent construction cost movements), margins might recover enough to offset some tax drag. If costs keep climbing, the insolvency rate will too.
What this means if you’re waiting for supply to catch up
If you’re holding off on a purchase expecting new supply to moderate prices, the insolvency numbers suggest that supply response is delayed further than the Accord timeline implies. The firms that would deliver that supply are disappearing.
If you’re an investor comparing yields in markets with different tax settings, favour jurisdictions where land tax and developer charges haven’t escalated recently, regional WA held up better than metro markets partly for this reason. Lower tax drag means more projects proceed, which eventually eases rental tightness.
If you’re a developer or builder, the next 12 months are about survival not expansion. Margins are thin, financing is expensive, and the tax base isn’t shrinking. Only projects with pre-sales above 70 per cent and locked-in finance should proceed.
Start here
Track state budget papers for any mention of property tax reform, the revenue reliance is explicit in the forward estimates, and any shift will show up there first. If you’re comparing cities for investment, weight tax settings as heavily as vacancy rates: they determine whether new supply can actually arrive. And if you’re in the industry, pressure-test cashflow against a scenario where holding costs stay high for another 24 months, that’s the risk case.
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General info, not financial advice.
