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Plans for stamp duty to be phased out
ONE OF the biggest barriers to buying a home could soon be lifted, after NSW Treasurer Dominic Perrottet announced plans to phase out stamp duty in his 2020 Budget. The changes would see homeowners having the option of either paying stamp duty or paying an annual property tax that is based on the value of their land. The property tax would consist of a fixed amount, plus a rate applied to the unimproved land value, and once a property is subject to the property tax, subsequent owners must pay the tax. If stamp duty has been paid on a property, then the property tax will not apply. Based on a propery worth $600,000, buyers could save $22,335 in upfront costs, while a propery worth $800,000 would have a saving of $31,335. According to NSW Treasury, the average owner-occupier could expect to pay a property tax of $1,812 per year, based on the NSW average unimproved land value of $437,500 Under the plan, owneroccupiers would pay a lower rate than property investors and protections would be in place to
prevent costs being passed on to tenants. First-home buyers who are eligible for stamp duty concessions could instead receive a grant up to $25,000 to put towards paying the tax or their home. Treasury is proposing price thresholds to restrict the number of properties that could opt-in to the property tax. “The price thresholds could be set to immediately allow over 80 per cent of residential properties and over 95 per cent of commercial properties to opt-in to the property tax on transaction,”NSW Treasury said. Mr Perrottet said stamp duty is a “relic from a bygone era when you picked one career, started a family, bought a home and basically settled in for life”. “It adds tens of thousands of dollars to the cost of the biggest financial commitment most people ever make,” he said. “If you want to move, change jobs, or switch careers, upsize or downsize to match your family size, stamp duty can be the spanner in the works. “It is holding our economy back at a time we need to be going full throttle.”
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A 2019 submission to the NSW Productivity Commission by the Grattan Institute said “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,” the submission reads. “If they are designed well and applied broadly, they do little to change people’s incentives to work, save, and invest.” The Real Estate Institute of NSW (REINSW) has welcomed the plan. REINSW CEO Tim McKibbin said stamp duty reform has been long overdue, and something the REINSW has actively sought for many years. “Stamp duty is an inefficient, inequitable tax that distorts market activity,” he said. “Not only does it discourage people from moving, especially downsizers who would otherwise free up housing stock, it also limits the additional expenditure home buyers could otherwise engage in. “While there is no such thing as a good tax, some are better
Buying a home could get a whole lot easier with plans to scrap stamp duty
than others. When tax becomes a consideration of a transaction and not a consequence, it’s a very bad tax.” Mr McKibbin said stamp duty has limited buyers from purchasing property. “People in NSW have elected not to pay stamp duty by not buying property,”he said. “On this basis, we welcome the news that stamp duty will finally be phased out in NSW. “However, we don’t support the replacement of one property tax with another property tax. “The question should be asked, why the property industry, which contributes so significantly to the state’s economy, must shoulder a disproportionate amount of the state’s tax burden.
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“A land tax may be more broadly-based than stamp duty, but it still only applies to property. Investors in shares, for instance, pay no comparable tax.” Mr McKibbin said the NSW Government collected $1,857,906,662 in stamp duty revenue in the three months to September 30, 2020, which is $235,300,000 more than for the same period last year. The government is consulting the community on the changes. To have your say visit www. haveyoursay.nsw.gov.au/ nsw-property-tax-proposal or submitting a written response to TaxReformTaskforce@treasury. nsw.gov.au by March 15, 2021
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