The NSW Government has today announced they are “considering a once in a generation change of giving home buyers the choice to pay either stamp duty and land tax (where applicable) or a new smaller annual property tax”.
This will effectively end stamp duty, which the Government notes “is one of the biggest financial barriers to home ownership”.
The new property tax proposal explains that “the proposed changes could give you the freedom to choose between paying stamp duty upfront or paying a much smaller annual property tax, when you buy your next home”.
“Removing the upfront cost of stamp duty could remove tens of thousands of dollars from the home purchase process and make it easier for first home buyers, families looking to upgrade and others looking to change their property to save what is needed to purchase their next home,” the proposal explains.
“Unless you are buying a property, there would be no change. If you have already paid stamp duty on your existing property, you would not be subject to an annual property tax. There would be no double taxation.
“It could deliver the most significant economic reform available right now to strengthen our state’s economy and increase our prosperity over the long term.”
The Government predicts these changes will provide a critical economic boost, injecting $11 billion over four years.
Adam Rigby, CEO and Founder of Upside Realty, tells Elite Agent that, for those working in real estate, stamp duty has “forever felt like an unnecessary burden”.
“My hope and beliefs are that it will have two clear positive impacts,” he said.
“Firstly, removing this barrier to purchase should see an increase in liquidity, favouring downsizers, for which the stamp duty burden can easily outweigh benefits of leaving the old family home, and first home buyers, who will gladly take any help they can get.”
Mr Rigby added that, for those looking for a change of scenery, a move to the suburbs or regional NSW looks “far more appealing” without stamp duty.
“Secondly,” he continued, “the industry has been holding its breath as it waits to see the impact of government stimulus and bank freezes wearing off”.
“This proposed stamp duty change might be what the market needs to maintain confidence and counter what otherwise might have been a drop in the market.
“On the other side of the coin, the government will need to ensure that they are clear to buyers that transacting prior to the change will not be detrimental to them, otherwise we may see a slowing market in the interim.”
REINSW has also welcomed the abolishing of the tax, with CEO Tim McKibbin referring to stamp duty as “an inefficient, inequitable tax that distorts market activity”.
“Not only does it discourage people from moving,” Mr McKibbin continued, “especially downsizers who would otherwise free up housing stock, it also limits the additional expenditure home buyers could otherwise engage in”.
“While there is no such thing as a good tax, some are better than others. When tax becomes a consideration of a transaction and not a consequence, it’s a very bad tax.”
Mr McKibbin, however, doesn’t agree with the proposed replacement to stamp duty.
“People in NSW have elected not to pay stamp duty by not buying property,” he stated.
“On this basis, we welcome the news that stamp duty will finally be phased out in NSW. However, we don’t support the replacement of one property tax with another property tax.”
Property Council NSW Executive Director, Jane Fitzgerald joined the praise chorus, stating that “stamp duty is an incredibly harmful tax and the Property Council welcomes the NSW Government’s intention to phase this out for the good of the wider economy”.
“The reform model proposed by the Government has many strengths and avoids mistakes of other jurisdictions.
“Property Council looks forward to working with the NSW Government on this initiative and appreciates the government’s commitment to consultation on this very important reform,” she said.
The NSW Government is calling upon interested parties to have their say on these proposed changes.