The NSW budget’s sweeping tax reform has exposed flaws in other states’ tax policies, and the consequences could be severe, tax experts have said.
The Tax Institute on Wednesday welcomed NSW Treasurer Dominic Perrottet’s tax reform plan which includes replacing stamp duty with an annual land tax.
Additionally, the NSW government will remove stamp duty on electric vehicles priced under $78,000 and extend the temporary reduction in the payroll tax rate.
Tax Institute director of tax policy Andrew Mills described the reforms as “bold” and welcome, and contrasted them with other states’ tax plans.
He said the recent Queensland and South Australian state budgets did little to change tax policy, while the Victorian state budgets included an increase to the payroll tax threshold and a 50 per cent “windfall gains tax” for rezoned land.
Where do the states stand on different tax issues?
The NSW government plans to replace stamp duty with an annual property tax.
In Victoria, the government plans to introduce a stamp duty “premium” on property transaction with a value over $2 million, and it plans to increase land tax by 25 per cent for homes over $1.8 million, and 30 per cent for homes over $3 million.
And in South Australia, the government plans to introduce a 50 per cent land tax discount for eligible build-to-rent projects.
The NSW government will extend the temporary reduction in the payroll tax rate from 5.45 per cent to 4.85 per cent until 2021-22.
At the same time, it will increase the payroll tax-free threshold to $1.2 million.
In Victoria, the payroll tax-free threshold will be increased to $700,000 and in South Australia there will be a one-year extension of the payroll tax exemption for eligible new trainees and apprentices’ wages.
“Tax reform is not a quick and easy job. It takes considerable technical and legal knowledge, it takes a lot of time and analysis of interweaving impacts and it takes brave political leadership,” Mills said.
“What these very different approaches show is that there is no unified plan or thinking around our tax system. Everyone is working not only independently, but on some topics, at complete odds with each other. It’s a recipe for disaster.”
‘Reckless spending’: Others slam the budget
The Australian Taxpayers’ Alliance (ATA) was less impressed by Perrottet’s tax plan, describing it as “reckless”.
“There is little to say about tax policy. The government will cut stamp duties on electric vehicles, but this small tax cut is more than offset with several other small tax increases,” ATA chief economist Dr John Humphreys said.
“Perhaps the best news is that the government has resisted the urge to follow Victoria’s example by introducing a series of large tax increases.”