NSW Will Phase Out Stamp Duty And Implement A Land Tax.

 

NSW Will Phase Out Stamp Duty And Implement A Land Tax.

Homebuyers in New South Wales will no longer have to pay thousands of dollars in stamp duty under a plan to be announced in the state budget next week. Premier Dominic Perrottet will finally move to phase out the dreaded tax paid to the state government by a buyer purchasing a home.

One of the major reforms in the government’s final pre-election budget will be NSW Premier Dominic Perrottet’s long-held goal of overhauling stamp duty and introducing a broad-based land tax.

H

The Herald can confirm that Perrottet will proceed with the significant reform, which will allow some home buyers to choose an annual land tax rather than an upfront stamp duty payment. 

The Cabinet’s expenditure review committee has approved a funding reservation for the changes, which will put NSW ahead of the other states in housing tax reform. Only the ACT has changed its stamp duty system.

According to the most recent reform update, the top 20% of NSW residential property prices would be ineligible for land tax and would continue to pay stamp duty, helping to limit the government’s revenue decline. Previous buyers would be unaffected.

The decision to implement a land tax would be permanently attached to the property, so future owners would be required to pay the land tax if a previous owner had.

This would eventually result in the abolition of stamp duty throughout NSW.

o

The NSW Treasury estimates that an optional annual tax would generate approximately 20% less revenue, resulting in a $2.5 billion annual shortfall.

Perrottet refused to reveal the specifics of the package that will be unveiled in the budget, and NSW Treasurer Matt Kean is deferring to the premier to detail his signature policy. However, senior government sources confirmed to the Herald that the reforms are included in the budget.

When he was treasurer, the premier championed stamp duty reform, describing it as an “inherently terrible tax,” but Perrottet has repeatedly stated that the state cannot afford to overhaul the tax system without federal assistance.

Federal Treasurer Jim Chalmers has stated that he is open to a collaborative approach to addressing housing affordability ahead of a meeting of state treasurers in Brisbane on July 22, where reform options to boost the economy will be discussed.

Perrottet told the Herald last week that tax reform would only be possible if the federal government came to the table.

m

“We need the federal government to assist states in financing productivity reforms to improve social outcomes such as housing affordability, health care, and education,” Perrottet said.

Stamp duty revenue increased by more than $5 billion during the pandemic due to higher house prices. According to Revenue NSW data, the government collected $12.2 billion in land-related transfer duty in the ten months leading up to April 2022.

In comparison, land duty was collected at a rate of $9.6 billion in 2020-21 and $7.1 billion in 2019-20. This fiscal year’s stamp duty revenue is more than three times greater than the $3.3 billion collected in 2011-12.

The ACT is the only Australian jurisdiction that has successfully implemented a policy to transition from stamp duty to a land tax regime. Stamp duty is being phased out over a 20-year period, which began in 2012.

NSW Labor’s shadow treasurer, Daniel Mookhey, said Perrottet had no mandate to impose a new land tax on the family home.

“Inflation is skyrocketing, interest rates are skyrocketing, electricity prices are rising, and tolls are about to rise again,” Mookhey said.

“Rather than rushing a land tax through Parliament, the premier should take it to the next election.”

The two major reforms in the state budget will be stamp duty reform and childcare, with Kean also announcing a major package to support women.

Kean has already announced that new childcare facilities will be built at Westmead, Bankstown-Lidcombe, Shellharbour, and Shoalhaven hospitals, with the government reviewing its other existing and planned hospitals to ensure hospital staff has access to childcare.

The government is also revamping its paid parental leave program. From October, there will be no distinction between primary and secondary caregivers, which means that every mother and father in the public sector will be entitled to at least 14 weeks of paid parental leave.