In November 2020 Dominic Perrottet,then state treasurer,took what he called a“first firm step” with a proposal to give home buyers a choice between paying stamp duty up front – which averages about 4 per cent of the purchase value – or a smaller annual property charge instead.
Once a property has switched to the annual charge,it would remain in that system for all subsequent owners. It is anticipated stamp duty on property purchases would be completely phased out by about 2050 under this scheme.
This option aims to minimise political backlash by providing home buyers with a choice.
But during a period of public consultation following the release of the 2020 plan,some legitimate criticisms were raised. There is concern this approach will introduce a two-tier property tax system in NSW lasting many decades where some properties would be subject to annual land tax while others are not. This coulddistort behaviour in the property market and undermine the economic benefits of reform.
The design of this scheme would also mean a significant decline in government revenue over the medium term as buyers swap stamp duty (a large upfront sum) for the much smaller annual charge.
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Last November, new state Treasurer Matt Kean said NSW was “going to need” federal financial support during the shift away from stamp duty. Perrottet,now premier,said only last week,“We need the federal government to help the state’s finance reforms to drive productivity to improve social outcomes like housing affordability,healthcare and education.”
TheHerald supports the abolition of stamp duty and welcomes the fresh momentum for property taxation reform in NSW and beyond. Perrottet has shown strong leadership in championing the overhaul of stamp duty. If he succeeds in ridding the state of this antiquated and inefficient tax it will deliver lasting social and economic benefits.
But the NSW government must heed the sensible feedback it received on the 2020 stamp duty reform model. Announcing a big tax reform is one thing,but the real challenge is to implement it well.
Perrottet must now ensure an optimal transition to a new broad-based land tax.