NSW to end stamp duty
The Institute is watching closely the stamp duty/land tax reform proposals in NSW following our own call for reform to land taxes in our recent submission to the Queensland Government ahead of the upcoming State budget.
Acting on recommendations from the Thodey review into federal-state financial relations, the NSW State Treasury has proposed an optional move away from stamp duty to an annual property tax based on land value, with all future owners locked into the levy.
Buyers would get the choice of paying the transfer duty or the property tax, and the rates will differ for owner-occupiers, investors and commercial tenants. lower rates would apply for owner-occupiers and higher rates for investors and commercial properties.
It would also enable people who opt-in to the system to eliminate any land tax liability while those who have already purchased a property will be unaffected.
The scheme could reduce outlays by about $20,000 over the first four years of home-ownership and would be capped at the rate calculated at the point of purchase.
Price thresholds would limit the number of properties initially eligible for transition to keep revenue and debt impacts within reasonable levels for the state budget but opt-in would be available to 80 percent of residential properties from day one. Protections would apply so that the property tax does not result in rent increases without a tenant’s agreement and a hardship scheme would recognise that taxpayers’ financial situations can change.
The Thodey report noted that numerous inquiries, including the Henry review and the 2015 Commonwealth Treasury tax review, had found stamp duty was one of the most inefficient and damaging taxes, with costs ranging from 34¢ to $1.07 for every extra dollar of revenue raised.
Instead of paying an average of $34,000 in stamp duty at the time of purchasing a property, the impost would be spread over a number of years to help more people enter the market.
Existing stamp duty concessions for first home buyers could be replaced with a grant of up to $25,000.
The stamp duty proposal will go to public consultation in NSW until March.
In the short term, the proposed model will reduce the NSW Government’s revenue. Over the longer term, the property tax would be revenue neutral, collecting the same amount of revenue as stamp duty and land tax. The Treasurer Mr Perrottet also indicated the model may inject more than $11 billion into the wider NSW economy in the first four years and boost NSW Gross State Product by 1.7 per cent over the long term.
Further information on the model is available here.
Any views that you have on this can be provided to Policy Manager, Martin Zaltron, via email or on (07) 3229 1589.Email Martin