Stamp duty vs property tax: How the NSW govt’s proposed changes could impact you

Possible changes to stamp duty in NSW have come under fire from property groups.

NSW Premier Dominic Perrottet’s proposed plan to introduce a property tax that would effectively replace stamp duty has come under fire from property groups.

The proposed changes, first floated in June last year, would give buyers the choice to either pay stamp duty upfront or pay a smaller annual tax in perpetuity when buying their next home.
The NSW government believes the change would inject $11 billion over four years into the state’s coffers and also remove the burden on property buyers, to allow them to avoid stamp duty and land tax (where applicable).
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NSW Premier Dominic Perrottet’s proposed property tax changes have come under fire.

The Real Estate Institute of NSW (REINSW) is strongly advocating against the property tax, saying the plan “defies basic logic”.

REINSW CEO Tim McKibbin said taxing property to make it cheaper was like getting Covid to improve your health and wellbeing.

“Stamp duty tax brackets have not changed since 1986 and by not adjusting for CPI, more and more properties are subject to higher rates. It’s disingenuous of the NSW Government to talk affordability while raking in billions each month in stamp duty from property consumers,” Mr McKibbin said.

As outlined in the Progress Paper for June 2021: NSW Property Tax Proposal released by the state government, stamp duty was introduced in 1865 and critics claim it has not kept pace with the way people live and work.

Proposed changes to the NSW property tax system aim to give people the choice to pay an annual tax rather than stamp duty and land tax (where applicable).

During his role as NSW Treasurer, Dominic Perrottet had advocated for stamp duty to be phased out in favour of a broader land tax and had consulted for months on how the current system could be improved.
“Research indicates that each additional dollar of residential stamp duty lowers living standards by 90 cents. Without stamp duty, the annual incomes of NSW residents could be increased by more than $10 billion in total,” Mr Perrottet said at the time.

“The proposed new property tax system, which replaces stamp duty with a small annual tax, would not be a panacea for our future economic challenges … but it would make things better.

“It would stimulate home ownership, grow the economy and create jobs.”

REINSW CEO Tim McKibbin says the property tax plan “defies basic logic”.

Under the current NSW legislation, full stamp duty concessions are available to first home buyers purchasing homes up to $650,000 with partial concessions offered on homes up to $800,000.

The June 2021 report quoted an earlier Productivity Commission white paper, which outlined how “stamp duty strongly discourages property transactions.”

“Reform would enable more mobility. Australian and international evidence suggests that the number of property transactions would increase by about 50 per cent in the long run,” it read.

Stamp duty changes will create jobs, the NSW government claims.

With the current financial year budget for stamp duty on track to be eclipsed by $3bn to $14bn, REINSW says the NSW Government is addicted to the current system.

“If the Government is genuine about helping first home buyers, the answer to affordability is additional supply, a much-improved DA process and tax cuts,” Mr McKibbin said.

“When a tax becomes a consideration of a transaction, it’s a bad tax. That’s what stamp duty already does and that’s what a property tax will do. Swapping one bad tax for another won’t help affordability.”
“At least with stamp duty, once it’s paid it’s done.

“The burden of a property tax is forever. Affordability is inextricably linked to supply. “Disincentivizing people from selling is at direct odds with freeing up available housing stock.”

During his first appearance at budget estimates in November last year, NSW Treasurer Matt Kean said replacing stamp duty with a land tax “could be one option” but said “a range of options” were under consideration by the state government.
The Premier’s office did not respond to requests for comment in time for the publication of this story.

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Originally published as Stamp duty vs property tax: How the NSW govt’s proposed changes could impact you