New South Wales Premier Dominic Perrottet wants to abolish stamp duty, labelling it the “worst tax any state can have”.
Perrottet said the tax was a major barrier to first home buyers being able to enter the property market.
"Our government is focused on one thing and that's helping people get into the housing market," Perrottet said.
"I believe stamp duty is the worst tax that any government can have. It is a massive impediment for people getting into the housing market."
Also read: Is now the time to buy property?
This is nothing new for Perrottet, who devised a proposal to abolish the controversial tax when he was treasurer under Gladys Berejiklian.
So, here’s a look at the current system and Perrottet’s proposal.
What is stamp duty?
Stamp duty is a fairly hefty tax NSW residents have to pay when they purchase a home.
The amount owed will be determined by - among other things - the price of the property, whether or not you’re a first home buyer, and if the property will be an investment.
It is a percentage of the property value, with concessions given for first home buyers.
For example, someone purchasing their second home for $800,000, that they intend to live in, will have to pay around $31,500 in stamp duty.
A first home buyer purchasing a $700,000 property will have to pay around $10,400 in stamp duty.
Alternative to stamp duty
The proposed reform would give home buyers in NSW the choice to pay stamp duty or an annual property tax based on land value and usage.
The property tax would consist of a fixed amount plus a rate applied to the unimproved land value of an individual property. This is the same approach as council rates.
Once a property is moved to the new system it remains subject to the yearly land tax, phasing out stamp duty over time.
The Premier stressed the policy had not been formally announced, and his government could not make changes to the one-off tax without approval from the Federal Government.
He said the state and federal governments should seize the opportunity for reform in response to the pandemic and the economic challenges posed by inflation.
"For way too long in this country, we have not had the reforms that we had under the Keating era and the Howard era," Perrottet said.
"They've all sat in the too-hard basket."
Criticism of the new proposal
NSW Labor criticised the proposal, saying switching a one-off stamp duty payment for a yearly land tax payment would lead to typical families paying $2,400 per year in taxes.
"I don't know where Mr Perrottet thinks that working families could find the money to pay him an annual land tax on their home that lasts forever," Shadow Treasurer Daniel Mookhey said.
"If Mr Perrottet thinks that families have more than $2,000 sitting around ready to pay him a land tax, then he's out of touch."