The CEO of NSW’s peak real estate industry body has labelled the current stamp duty model as “a very bad tax”.
“Stamp duty is an inefficient, inequitable tax that distorts market activity,” he said.
“Not only does it discourage people from moving, especially downsizers who would otherwise free up housing stock, it also limits the additional expenditure home buyers could otherwise engage in,” Mr McKibbin said.
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The proposed change would mean stamp duty would be replaced with an annual land tax on new property transactions.
Homebuyers would have a choice between paying a one-off stamp duty bill, which could be up to $100,000 in Sydney, or an annual property tax.
First-time buyers would get an extra incentive with a grant worth up to $25,000 under the proposed overhaul instead of an exemption from stamp duty.
“While there is no such thing as a good tax, some are better than others. When tax becomes a consideration of a transaction and not a consequence, it’s a very bad tax,” Mr McKibbin said.
“People in NSW have elected not to pay stamp duty by not buying property,” he continued.
“On this basis, we welcome the news that stamp duty will finally be phased out in NSW.”
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The NSW Government collected more than $1.85 billion in stamp duty revenue in the three months to September 30, 2020, which is $235.3 million more than for the same period last year.
“The property industry, including property consumers, carries a disproportionate amount of the state’s tax burden. It should be more equitably spread across all industries,” Mr McKibbin commented.
Treasurer Dominic Perrottet said the current stamp duty system was centuries old and in need of an overhaul to give NSW residents a modern tax system.
In his Budget speech, Mr Perrottet slammed the current stamp duty model as a “relic from a bygone era”.
“This is the single most important economic reform we can tackle to turn the Australian dream into NSW’s reality,” Mr Perrottet said.
Mr Perrottet said the current system was “one of the biggest financial barriers to home ownership” in NSW and said an overhaul would enable more people to be able to buy a house.
“This is a reform proposal for NSW where more people can own their home and have more freedom to choose the right property for their family at every stage of life,” he said.
Mr Perrottet said the model proposed could bring tens of thousands of dollars of relief to the average homebuyer and turbocharge economic growth.
“This is a vision for every person and family in NSW – from first home buyers trying to get a foot on the property ladder, to frontline workers moving to service our regional communities, and retirees who are ready to downsize,” he said.
The change would kick in from the second half of 2021 after seeking community feedback over the coming months.