The NSW Government wants to help the people of NSW achieve the Australian dream of home ownership and grow the NSW economy.
To help make this happen, the Government is 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.
IMPORTANT KEY TAKEAWAYS
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.
Stamp duty is one of the biggest financial barriers to home ownership.
If implemented, 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.
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.
This proposed change could put money back into the pockets of NSW residents when taking the significant financial step of buying a home.
Land tax places a large tax burden on a small number of taxpayers. If implemented, these proposed changes could give property buyers the freedom to choose either to pay stamp duty and land tax (where applicable) or to pay an annual property tax.
Real Estate Institute of NSW chief executive Tim McKibbin said stamp duty reform had been long overdue because it distorted market activity and discouraged people from moving.
“When tax becomes a consideration of a transaction and not a consequence, it’s a very bad tax,” he said.
However, he felt a land tax still placed a “disproportionate amount of the state’s tax burden” on the property industry and property consumers, which should be more equitably spread across all industries.
Mr McKibbin said the state government had collected nearly $1.9 billion in stamp duty revenue in the three months to September 30, which is $235 million more than for the same period last year.
So 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.
*Information within this publication has been sourced from Domain.com.au, Australian Financial Review, Business Insider and NSW Government Treasury.