In the New South Wales state budget 2020-2021 handed down yesterday, Treasurer Dominic Perrottet revealed plans to reform the “inefficient property tax system” currently in place, and to do so based on the feedback of the state’s residents.
Perrottet proposed transitioning from the current model of a mandatory upfront stamp duty, to one where residents have the choice to instead pay a smaller annual land tax on new property transactions based on the value of their land, with rates varying for owner-occupiers, investors and commercial tenants.
"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," reads the NSW Treasury website.
"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."
Over the coming months, the NSW government will seek feedback from the public on the possible transition away from the current stamp duty system, with the goal of any change being to “lower barriers to home ownership” and “boost long-term growth”.
Read more: The lowdown on stamp duty reform
According to Urban Taskforce CEO Tom Forrest, the plan to seek community views on reform to stamp duty is “great news” as the current model “distorts behaviour and reduces productivity across the economy”.
“The Treasurer deserves great credit for taking on this long vexed, yet universally acknowledged contagion on the tax system,” Forrest said.
“Reform of stamp duty will make home ownership easier for young families and all new home buyers. It will remove the disincentive on moving for those who seek to down-size.
“The proposal in the budget is nuanced and reflects the excellent work undertaken to date by the NSW Productivity Commission.”
Treasurer Perrottet’s proposed stamp duty reform comes as part of his larger aim of making the budget about “more than just…responding to COVID-19”, instead setting the state up for success with a longer-term vision.