Calls rise for stamp duty overhaul ahead of NSW reform

The reform has been long in the works, with the NSW state government having previously launched a consultation on plans to enable home buyers to opt out of paying a lump stamp duty sum at purchase – and instead choose an annual property tax. 

However, should a home owner opt to pay property tax instead of stamp duty, the change would apply to the property thereafter, regardless of owner.

Speaking on Monday (13 June), the NSW Premier (and former NSW treasurer) Dominic Perrottet reiterated his position on stamp duty, telling media that he believes stamp duty is “the worst tax that any government can have”.

He continued that the upcoming budget will therefore include “announcements in relation to housing affordability, and obviously, stamp duty is the biggest impediment, particularly for young people getting their keys to their very first home”.

However, he added that the state cannot abolish stamp duty without support from the federal government.

According to reports from the Sydney Morning Herald, the Premier is meeting with the federal government later this week to discuss its proposed stamp duty reform, which would likely exclude properties at the top 20 per cent of the market (and therefore ensure the state government continues to receive some income from stamp duty – which last year totalled $9 billion).

Given the reignition of the reform calls, calls are now increasing for other states to follow suit.

For example, RSM Partner and indirect tax specialist Sam Mohammad said the push by Mr Perrottet to scrap stamp duty in favour of an annual land tax should be considered by the Queensland state government in its upcoming budget.

Mr Mohammad said: “Despite the Queensland state budget also due to be handed down next week, potential stamp duty reform has yet to form part of the discussion for Queensland’s future economic prosperity.”

He noted that Brisbane’s median house price recently surpassed the $1 million milestone (according to the REIQ).

“As property prices rise, the average Queensland resident would be paying more stamp duty than ever before, particularly since Queensland’s top marginal stamp duty rate of 5.75 per cent is one of the highest in the country,” he continued.

“Resonating strongly with most tax experts, first home buyers and industry groups, the alternative system of land tax could make home ownership more accessible, support household mobility and better facilitate economic growth and  prosperity for Queensland.”

He continued: “The NSW Government’s proposal is the first real attempt by a state government to implement the (2010) Henry Tax Review’s recommendation of a broader land tax to replace stamp duty on property transfers. 

“While the proposed shift to an annual land tax is likely to result in a loss of direct revenue – with some estimates suggesting a 20 per cent reduction in annual revenue collected – the expectation is that the productivity gains and economic growth will more than compensate for the loss of revenue.” 

Similarly, the Real Estate Institute of Victoria (REIV) CEO Quentin Kilian said the group "welcome[d] a national discussion on a fundamental overhaul of real estate industry taxation", which he sai d was "quite frankly, well overdue." 

“For too long here in Victoria, our government has been reliant on stamp duty, a tax which is hugely prohibitive for first homebuyers looking to get into the market, not to mention new investors and even downsizers," Mr Kilian said. 

“Each year, the Victorian Government derives up to $14 billion in revenue from the property sector – nearly half of all taxation revenue raised – but not much has changed in terms of new support of the sector either by investing in more social housing or contributing to other initiatives that help develop a stable and sustainable property market. This has to change.” 

 Ahead of the 22 July forum, the REIV said it would meet with other Victorian property sector bodies to discuss a new and better way forward.  

“With this rare opportunity to shape public policy, it’s important the sector comes together to confirm what an alternative tax regime might look like, as we all work together to serve the interests of Victorian homeowners and aspirants,” Mr Kilian added.  

“REIV will be representing the interests of more than 2000 real estate businesses and another 7000 individual members, who have long been calling for change.”  

[Related: NSW Premier presses on with stamp duty scrap]