It would be replaced by a more manageable annual property tax, which means the taxman still gets his cut but it allows more people to enter the property market.
And it would make home ownership a real proposition for a whole generation of Australians already faced with the burden of saving a deposit and then having to back up with a stamp tax of around $25,000 all up for a $500,000 home.
Make no mistakes, you will still be paying the equivalent amount in your property tax which may take typically 20 years to pay off, but the “buy now, pay later” scheme will prove a winner for homebuyers tired of renting.
News that the 2020-21 NSW Budget could bring the great Australian dream of owning your own home came one step closer to reality for thousands of people this week, with a public consultation process to seek the community’s view on tax reform to reduce the upfront costs for buyers.
The community will be asked if they want the stamp duty system overhauled to allow buyers to opt out of stamp duty and instead choose a smaller annual property tax.
That is just a “we listen”, feel good publicity angle and the big tip is from inner circles is that stamp duty is gone.
And good riddance! Stamp duty is one of the biggest financial barriers to home ownership.
Treasurer Dominic Perrottet said the current stamp duty system was centuries old and in need of an overhaul to give NSW residents a modern tax system.
“This is the single most important economic reform we can tackle to turn the Australian dream into NSW’s reality,” Mr Perrottet said.
“This is a reform proposal for NSW where more people can own their home and have more freedom to choose the right property for their family at every stage of life.
“This is a vision for every person and family in NSW – from first home buyers trying to get a foot on the property ladder, to frontline workers moving to service our regional communities, and retirees who are ready to downsize.
“The NSW Government will work with people and communities to shape any reform over the coming months to ensure it is tailor-made for the current and future needs of our State.”
The consultation process will kickstart with a proposed model that would:
• Give people purchasing a property the choice between paying stamp duty upfront or opting for the smaller annual property tax;
• Enable people who opt-in to the system to also eliminate any land tax liability;
• Ensure that the current property owners who are not buying or selling are not affected;
• Replace the current stamp duty concessions provided to first home buyers with a new grant; and
• The proposed model includes a property tax rate that would support and incentivise home ownership with a lower rate for owner-occupiers and higher rates for investors and commercial properties.
Turbo charge the NSW economy
Mr Perrottet said the model proposed could bring tens of thousands of dollars of relief to the average home buyer and turbocharge economic growth.
“This model may inject more than $11B into the NSW economy in the first four years and boost NSW Gross State Product by 1.7% over the long term,” Mr Perrottet said.
“Reform of the inefficient stamp duty system could also create and support thousands of jobs to boost the economy and kick-start our recovery for a prosperous, post-pandemic NSW.”
The reform could be set in motion in the second half of 2021 after seeking community feedback over the coming months.
The abolition of stamp duty is a necessary step according to the Housing Industry Association.
“Stamp duty is an inefficient tax, it is an unfit-for-purpose source of state government revenue and its removal should be a priority for the NSW Government,” HIA Executive Director David Bare said.
“The COVID-19 recession has highlighted all of the weaknesses of stamp duty. It is impeding the ability of the population to shift to pursue education and employment opportunities and it is causing a decline in revenue to state governments just when they need a stable taxation base.
“Stamp duty revenue depends on two main factors – dwelling prices and the volume of transactions occuring in the market – it is subject to the whims of property market. When the property market is booming with strong price growth and large transaction volumes, stamp duty provides windfall revenues. By the same token in times of property market weakness, stamp duty revenues also fall and weigh on budget outcomes.
“In NSW, Stamp Duty rates have not been reformed since 1985, when the average house price was $70,000. “Increases in home prices cause stamp duty bills to accelerate because stamp duty rate brackets are rarely updated. This is the problem of stamp duty creep,” Mr Bare said.
To find out more and have your say on the proposed model, visit: www.treasury.nsw.gov.au/property-tax-proposal
