James O’Doherty: Stamp duty plan latest example of the Premier’s crash or crash through approach
Dominic Perrottet has learned his lesson after a stamp duty plan has morphed into a slow adapt or die approach, writes James O’Doherty.
Opinion
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Dominic Perrottet has learned two lessons when it comes to major reform: go slowly and give people choice.
The thinking is that people need time to digest any radical change and could baulk if they are forced to adapt to a new way of doing things.
Both lessons were central to the design of the Premier’s signature property tax proposal.
It has certainly come slowly – Perrottet has been talking about stamp duty reform for more than two years.
It was first suggested in a major review of federal-state relations by former Telstra boss David Thodey.
The element of choice is also crucial: homes purchased under the property tax option would not be locked into the scheme. Subsequent buyers could choose to pay stamp duty if they wanted.
Because properties will not be locked into property tax forever, this policy would not do much to gradually phase out stamp duty.
But it is, as Treasurer Matt Kean said on Tuesday, an exercise in “testing the waters”.
The so-called “First Home Buyer Choice” policy was one of three centrepiece measures in Kean’s first budget, including a plan to introduce universal pre-kindergarten by 2030.
Those two policies were Perrottet’s brainchildren.
Kean had his own baby – a $5bn policy to create more child care places and drive prices down.
Former federal cabinet minister Christopher Pyne, who was in Macquarie Street on Tuesday night for Liberal budget functions, told Perrottet and Kean to “go big”. It appears they didn’t need the advice.
While it wasn’t the biggest spending measure outlined in Kean’s pre-election cash splash, the stamp duty proposal was one of the most significant – and the most divisive.
Government figures are confident of getting legislation to enact the scheme through parliament this year. But that might not be so easy.
NSW Labor will oppose legislation to give first-home buyers the choice to pay property tax.
In one of the opposition’s first substantive policy commitments, leader Chris Minns said Labor “can’t support” a “never-ending” tax on the family home.
The Greens oppose the plan as it currently stands, as do the Shooters, Fishers and Farmers Party. Former Liberal turned crossbench MP John Sidoti is also staunchly against it.
But in opposing the property tax option, Labor opens itself up to claims they are standing in the way of first-home buyers getting their foot on the property ladder.
The stance has already caused some unease within Labor ranks.
Looking at the calculations, the choice for many would appear to be a no-brainer.
Paying property tax would make sense for first-home buyers who are lucky enough to have a well-paying job that can service a mortgage but haven’t saved enough to pay a big lump sum in stamp duty in addition to a sizeable deposit.
Particularly if they plan to upsize down the track.
Avoiding stamp duty would also let buyers put more money into a deposit, which would in turn decrease the premium they pay to the bank in Lenders Mortgage Insurance.
But if a first-home buyer who has saved hard gets lucky and finds their “forever home”, they may choose to pay stamp duty. Anyone buying their first-home property for less than $650,000 would also continue to be exempt from stamp duty entirely, so would never choose to pay an unnecessary land tax.
If the legislation fails to pass this year, stamp duty could become a major policy battle at the next election.
Ahead of the budget being released, Labor was already mulling an all-out attack on what it calls a “broadbased property tax”.
It is expected to target voters in growing outer Sydney suburbs with campaign material warning of Perrottet’s plan to impose an everlasting tax on the family home.
Delivering a big-spending, big-reform budget on Tuesday was a calculated approach from Perrottet and Kean. Both men, 39 and 40 respectively, want to be seen as young and fresh, with big ideas for how to improve the state.
They do not want to be seen as leading a tired government that has been in power since 2011 and now seeking a historic fourth term.
Perrottet’s crash or crash through approach on reform has worked before, when he teamed up with Victorian Premier Daniel Andrews to speed up Australia’s reopening during the dark days of the Covid pandemic.
Both governments are now tackling a universal pre-kindergarten schooling year by 2030.
The Victorians are also understood to be interested in how the NSW stamp duty proposal is going to work.
With the government taking such a big policy platform to the next election the pressure is now on Labor to present its case for change.
While the policy offering from the opposition has so far been slim to none, there will be some promises in Minns’ budget reply on Thursday.
They include more money for toll relief, a promise to build preschools alongside all new public primary schools, and a beefed-up local procurement policy for public transport projects.
Minns cannot afford a small-target strategy: in March, voters will have a clear choice to make.
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