news, act-politics, nsw stamp duty, act stamp duty
The NSW government has learned from the “failings” of ACT’s tax reform program and proposed a good model to phase out stamp duty, the property sector says. But Chief Minister Andrew Barr said the framework had serious disadvantages while the territory’s was more sustainable. The ACT has led the way on phasing out stamp duty, halfway through its 20-year reform package. It has gradually reduced stamp duty costs while increasing residential and commercial rates. The tax is on track to be abolished by the early-to-mid-2030s, Mr Barr said. NSW Treasurer Dominic Perrottet revealed a plan to phase out stamp duty at last week’s state budget. The proposed changes would be optional, with prospective property buyers choosing whether to pay stamp duty or a yearly land tax. Property Council of Australia chief executive Ken Morrison praised NSW’s framework and said it learned lessons from ACT’s failings. He said the NSW opt-in model meant the power was with the taxpayer. “If you’re an existing homeowner and you’re not selling it then you’re not paying a new property tax,” he said. “The disadvantage of that model is it takes a long time before all the properties switch over. In ACT they say we don’t care if you’re buying or selling or not, you’re going to pay higher rates and stamp duty.” Mr Morrison claimed the commercial sector had been subsidising the residential market during ACT’s reform. He was also concerned there was no clarity on what the tax model would look like at the end of the 20-year reform period. But Mr Barr said the ACT’s long-term approach had allowed a more stable and consistent transition and ability to forecast revenues with greater accuracy. He said the “switch-on-sale” model that NSW put forward for public consultation had some serious disadvantages. It wold create a disincentive to sell property and create a large shortfall in revenue in the short term, he said. “We will monitor the consultation being undertaken by NSW regarding the “switch-on-sale” or opt-in model,” Mr Barr said. “It creates the risk of adding significant complexity to the housing market and may not facilitate a faster transition to a more equitable taxation system. Time will tell if it is actually implemented and what the take up will be.” Mr Barr said over the next four years he would focus on cutting stamp duty faster at the affordable end of the market. “This is, of course, contingent on the treasurer of the day actually delivering a stamp duty cut in each budget. I started these reforms in 2012 and stamp duty will continue to reduce every budget I deliver,” he said. Economist Cherelle Murphy said while the NSW opt-in system was more politically palatable, it would take longer to become revenue-neutral. The ACT recouped lost stamp duty revenue early through higher rates. But NSW will have to deal with a short-term loss in revenue which will take longer to recoup. She said in the long run, taxpayers shouldn’t be worse off in either system. “It’s a little frustrating the pace of which state tax reform happens,” she said. “Even with this NSW reform it’s not actually legislation yet, it’s just an idea. It would be good to see some progression.”
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The NSW government has learned from the “failings” of ACT’s tax reform program and proposed a good model to phase out stamp duty, the property sector says.
But Chief Minister Andrew Barr said the framework had serious disadvantages while the territory’s was more sustainable.
The ACT has led the way on phasing out stamp duty, halfway through its 20-year reform package.
It has gradually reduced stamp duty costs while increasing residential and commercial rates.
The tax is on track to be abolished by the early-to-mid-2030s, Mr Barr said.
NSW Treasurer Dominic Perrottet revealed a plan to phase out stamp duty at last week’s state budget.
The proposed changes would be optional, with prospective property buyers choosing whether to pay stamp duty or a yearly land tax.
Property Council of Australia chief executive Ken Morrison praised NSW’s framework and said it learned lessons from ACT’s failings.
He said the NSW opt-in model meant the power was with the taxpayer.
“If you’re an existing homeowner and you’re not selling it then you’re not paying a new property tax,” he said.
“The disadvantage of that model is it takes a long time before all the properties switch over. In ACT they say we don’t care if you’re buying or selling or not, you’re going to pay higher rates and stamp duty.”
Mr Morrison claimed the commercial sector had been subsidising the residential market during ACT’s reform.
He was also concerned there was no clarity on what the tax model would look like at the end of the 20-year reform period.
But Mr Barr said the ACT’s long-term approach had allowed a more stable and consistent transition and ability to forecast revenues with greater accuracy.
He said the “switch-on-sale” model that NSW put forward for public consultation had some serious disadvantages.
It wold create a disincentive to sell property and create a large shortfall in revenue in the short term, he said.
“We will monitor the consultation being undertaken by NSW regarding the “switch-on-sale” or opt-in model,” Mr Barr said.
“It creates the risk of adding significant complexity to the housing market and may not facilitate a faster transition to a more equitable taxation system. Time will tell if it is actually implemented and what the take up will be.”
Mr Barr said over the next four years he would focus on cutting stamp duty faster at the affordable end of the market.
“This is, of course, contingent on the treasurer of the day actually delivering a stamp duty cut in each budget. I started these reforms in 2012 and stamp duty will continue to reduce every budget I deliver,” he said.
Economist Cherelle Murphy said while the NSW opt-in system was more politically palatable, it would take longer to become revenue-neutral.
The ACT recouped lost stamp duty revenue early through higher rates. But NSW will have to deal with a short-term loss in revenue which will take longer to recoup.
She said in the long run, taxpayers shouldn’t be worse off in either system. “It’s a little frustrating the pace of which state tax reform happens,” she said.
“Even with this NSW reform it’s not actually legislation yet, it’s just an idea. It would be good to see some progression.”
