- The 2020-21 NSW State Budget includes a plan to phase out stamp duty in the state, giving homebuyers the option to pay an annual land tax instead.
“Stamp duty is a relic from a bygone era when you picked one career, started a family, bought a home and basically settled in for life,” said Treasurer Dominic Perrottet in his Budget speech.
- The government will seek community consultation until March.
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They’ve been implying it for what feels like forever, but with the announcement of the state’s 2020-21 Budget, the NSW government has made clear it intends to phase out stamp duty.
In the budget, which was handed down on Tuesday, NSW Treasurer Dominic Perrottet announced the government would seek seek community consultation until March on its proposed model, which would replace stamp duty with an annual land tax.
Under the proposed model, property buyers would have the option to pay a large, upfront fee – much like how stamp duty functions now – or an annual land tax, which would be calculated as a fixed sum plus a rate applied to the unimproved land value of the property.
“Stamp duty is a relic from a bygone era when you picked one career, started a family, bought a home and basically settled in for life,” Perrottet said in his Budget speech.
“It adds tens of thousands of dollars to the cost of the biggest financial commitment most people ever make. If you want to move, change jobs, or switch careers, upsize or downsize to match your family size, stamp duty can be the spanner in the works.
“It is holding our economy back at a time we need to be going full throttle.”
The NSW government has been floating the idea of stamp duty reform – which it argues will be cost-neutral in the long term – for some time now.
While many Australian states have grown reliant on stamp duty to fluff their coffers, it comes with significant downsides.
In Sydney and Melbourne, the country’s most expensive capitals, the median house price attracts stamp duties in excess of $40,000. It can be a handbrake on buying and selling activity, and acts as a disincentive for punters to downsize when they otherwise would.
How will it work?
In moving away from something as hefty and consequential as stamp duty, the transition is as important as the detail.
The changes will only apply to those buying property. Those who have already forked out stamp duty will not be required to pay the new land tax.
Those who would usually receive stamp duty concessions, like first home buyers, would instead be given a grant of up to $25,000 which could go towards servicing the land tax or improvements to the property.
The proposal would tax owner-occupiers at a lower rate than investment properties, but the government insists there will be protections in place to ensure costs are not passed onto tenants without their agreement.
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