Calling it the “most significant reform in a generation” to stamp duty, the NSW government has announced that from July 1, 2019, the seven stamp duty tax brackets will move in line with the consumer price index.
Indexing the tax to inflation will save the average property buyer $500 from the introduction of the move, with that amount to increase over time.
Critics say it’s a drop in the ocean of how much stamp duty costs consumers. For the average homeowner spending $800,000 on a home in Sydney, stamp duty adds on $31,490.
“We haven’t seen any significant action on stamp duty brackets since 1986 when the median house price in Sydney was $100,000, now it has climbed to $1 million,” said Treasurer Dominic Perrottet in a statement.
“Whether you are a first home buyer, a downsizer or upgrading to the family home you will ultimately benefit as a result of this reform. Pegging stamp duty to CPI will reduce the tax burden on homebuyers allowing them to put more money towards a deposit.”
According to the NSW Treasury, between 2002 and 2017 bracket creep saw the average rate of stamp duty payable increase from 3.37 per cent to 4.05 per cent. If the stamp duty brackets had been indexed 15 years ago, the amount payable on a $500,000 home would be approximately $2000 lower.
Property Council NSW Executive Director Jane Fitzgerald has said the change is a ‘much needed structural reform’.
“In 2018, stamp duty adds almost $50,000 to the purchase of the average property in Sydney and reducing what purchasers have to pay in tax will make buying a home that little bit easier,” said Ms Fitzgerald.
“Stamp duty is a handbrake on transaction activity and locks people into housing which is not appropriate for their needs.”
HIA principal economist Tim Reardon said that the one dollar in every five dollars of state revenue comes from stamp duty, showing how reliant the government is on the tax.
“Stamp duty is an inefficient tax and it has a disproportionately high impact on households that are vulnerable due to changes in their circumstances including employment, health or other family-related matters,” said Mr Reardon.
“Stamp Duty is also a volatile source of tax revenue, as the NSW Government is currently experiencing. A small fall in house prices has had a disproportionate impact of state government revenue.”
Both the Property Council and the HIA are still calling for the government to abolish stamp duty entirely to aid affordability, buoyed by the actions of states like the ACT which is currently undergoing a plan to remove the tax.