Calls for changes to stamp duty are starting to grow stronger after New South Wales Treasurer Dominic Perrottet put the federal government on notice to act on tax reforms.
In a recently released report, an independent panel appointed by the NSW Treasurer looked at how NSW and the Commonwealth could work together to build a stronger economy.
One of the key findings in the report was how both Federal and State Governments needed to address the impact stamp duty is having on homeowners’ ability to purchase property and also move homes when it suited their needs.
“About half of all submissions raised the issue of stamp or transfer duties, with the majority calling for the tax to be replaced by something fairer, efficient and predictable that would give people greater flexibility to move house when it suits them,” the report stated.
A government addiction
REINSW President Leanne Pilkington believes NSW needs to see stamp duty reform to aid flexibility but can’t see a land tax being a better option amongst homeowners.
“In Sydney, the median house price is $1.1 million and you pay about $40,000 per million on stamp duty,” she explained.
“So it definitely does turn people off from selling, there’s no doubt about it.
“There have been conversations around a broad-based land tax, but that’s not going to be popular.”
Ms Pilkington feels that lowering stamp duty rates, which currently range from 1.25 per cent to 7 per cent in NSW, could be lowered to achieve the same outcome.
“There is some evidence in other states that a decrease in stamp duty will see an increase in transactions and therefore the Government would actually make more money by charging less stamp duty,” she said.
At this stage, Ms Pilkington thinks the Government is currently too addicted to the tax revenue to make any serious changes.
“We get about $10 billion in stamp duty in the last six months, so it’s a big risk for the Government, they’re pretty addicted to the revenue,” she said.
“I think it’s going to be a massive thing to get them to change. I would love to see them do some modelling to see what has happened in other places, but I don’t think they have the will.”
The ACT model isn’t working
Chief Executive of the Property Council Ken Morrison believes that NSW needs stamp duty reform, but the changes will be hard to implement.
“There’s no shortage of experts who can tell us what is wrong with stamp duty and why it is one of our most inefficient and unpopular taxes,” he said.
“However, policy and political gurus who can deliver a smart, sustainable and politically saleable alternative appear to be in much shorter supply.
“Our state and territory governments have become addicted to stamp duty’s rivers of gold when property markets are booming. They scramble for other sources of revenue when markets dip.”
Mr Morrison said while a land tax is an option, it doesn’t appear to be working in the ACT.
“The ACT is often held up as the reform model. The Territory government is eight years into a 20-year reform program to replace stamp duty with a land tax-style property rate,” he said.
“Advocates of the ACT approach need to take a much closer and more critical look at how it’s actually played out for residential and commercial property owners there.
“And with another 12 years to go down the reform path, the ACT Government still can’t describe how and when stamp duty will actually be abolished. On the current trend, probably never.
“Yes, we need to do something about stamp duty but simply swapping this revenue onto a new land tax isn’t as simple as it looks and certainly isn’t working in Canberra.
“We’ll need to think deeper and harder to deliver meaningful reform.”