This week, Victorian Treasurer Tim Pallas announced the State Government would be slashing stamp duty.
It’s not the wholesale removal of the tax that the New South Wales Government is considering, rather a cut of 50 per cent for new home builds under $1m and 25 per cent for existing properties under $1m.
The Property Council’s Chief Executive Ken Morrison had stamp duty firmly in his crosshairs as he assured PCA stakeholders today of the need to completely be rid of the tax.
“There is one proposition that unites economists, policy makers and industry alike – stamp duty is a terrible tax,” Mr Morrison said.
“Its evils are well understood: it distorts activity, reduces transactions, traps people in inappropriate housing, reduces labour mobility and makes housing construction more expensive. It does everything a tax shouldn’t do.
“It also raises a lot of revenue which governments rely on, so the challenge has always been what to replace stamp duty with, not whether it should be abolished.”
Mr Morrison supports NSW Treasurer Dominic Perrottet’s reform model to phase out stamp duty, claiming it “avoids the big mistakes made in the ACT”.
He is referring to reform plans in the Capital Territory which are yet to play out after nine years, with business owners currently paying both an annual property tax and the full stamp duty tax when purchasing the property.
“The NSW plan avoids these traps,” Mr Morrison explained.
“Future property buyers will be given the option of choosing between an upfront stamp duty payment, or a new annual property tax. This choice is fundamental and keeps governments honest by not pushing the rate of the replacement annual property tax too high.
“It’s also designed to be revenue neutral over the long run and revenue neutral for business property, which underscores its integrity as a real reform measure, not just a sneaky revenue switch.
“The Property Council has a seat at the table in the consultation process and will be ensuring the interests of all our members across the residential and commercial sectors are effectively represented in the final design of the reform measure.”
Real Estate Institute of NSW President Tim McKibbin, however, doesn’t feel the measures go far enough, claiming the vagaries of the proposal are likely to cause hesitation and confusion upon potential buyers.
“Trading one punitive property tax for another is not tax reform as suggested,” he said last week.
“The REINSW fully supports a meaningful dialogue in relation to tax reform but yesterday’s announcement that stamp duty is to be replaced by land tax at some point in the future does not represent consultation.
“The community has not been given any details upon which to make decisions for the largest investment most of us will ever make.”