NSW - STAMP DUTY
New South Wales Treasurer, Dominic Perrottet, recently announced that NSW government will potentially undertake one of the biggest changes to the State’s tax system in decades in a bid to boost its economy. The proposal put forward will be to gradually phase out stamp duty and replace it with an annual land tax on new property transactions. The process will be in a manner similar to how physical paper titles to properties have been replaced with electronic copies at all settlements. In addition to removing stamp duty, eligible first time home buyers would also receive a grant of up to $25,000.00 instead of the current exemption from stamp duty for home buyers purchasing a home under $1 million.
Mr Perrottet insists that whilst initially the state may lose money from not receiving the large one time up front stamp duty payment, it will actually make more money over the long term by the home owner having to make small annual land tax payments over the life time of owning the property. Mr Perrottet estimates that this new system could potentially inject up to “$11 billion into the NSW economy in the firs four years and boost NSW gross state product by 1.7 per cent over the long term”.
It is worth noting that the ACT abolished stamp duty for first time home buyers with a combined household income of less than $160,000.00 back in July 2019.
Currently, the proposal suggests that the removal of stamp duty will not be forced on new home buyers initially. Instead, new home buyers will have a choice between either paying a one-off stamp duty bill or a much lower annual property tax for the period of time they own the property. Whilst it may be a choice initially, its pretty hard to not imagine stamp duty being completely abolished by a set date much like the roll out of mandatory electronic settlements in NSW.
Naturally, the opposition government in NSW are sceptical of the proposal with one of their major concerns being the government’s lack of consultation with the opposition prior to the announced reforms. Another concern that was raised by the opposition government was in relation to the potential impact on farmers.
Members of the public can go to https://www.haveyoursay.nsw.gov.au/nsw-property-tax-proposal to have their say on the stamp duty reforms. Submissions will close in March 2021 at which time the government will report its findings. If it is found that there is public support for the reform, the Berejiklian government would look to introduce legislation in the second half of 2021.
Whilst the Palaszczuk government has not made any announcements regarding similar reforms to our tax systems as of yet, I imagine that all eyes will be on NSW to gauge public support and whether such reforms generate as much of a boost to the economy as is being suggested.
Should you require further information please contact Catherine Wallace catherine@wallaceweir.com.au or Chelsey Grbcic chelsey@wallaceweir.com.au from Wallace Law Group.
