Yahoo Finance Stamp Duty: Should this controversial tax be axed?
NSW Premier Dominic Perrottet and Treasurer Matt Kean appear to be on different pages when it comes to stamp duty.
Perrottet has been vocal about ditching the controversial tax, while Kean has had to walk back on statements he made suggesting NSW may keep the tax.
"Stamp duty is an inherently terrible tax," Perrottet told the Budget Estimates hearing in NSW Parliament.
"Stamp duty continues to grow and be an impediment to people getting into the property market."
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However, the next day, Kean said there may be “other ways” to improve housing affordability than replacing stamp duty.
"We obviously want to tackle that issue, this may be one lever which we could consider," Kean said.
So, should they ditch the tax? Here is a look at what stamp duty is, how it affects you and what may replace it.
How stamp duty currently works
Stamp duty is a fairly hefty tax NSW residents have to pay when they purchase a home.
The amount owed will be determined by the price of the property, whether or not you’re a first home buyer and if the property will be an investment, among other things.
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.
Why should we replace stamp duty?
The tax has been slammed for a range of reasons, with many saying it acts as a huge barrier, not only to those looking to access the market, but also those wanting to upsize or downsize.
For example, an elderly couple may not look to downsize from their large family home because they don’t want to pay the large tax.
This in turn prevents a younger couple who are perhaps looking to upsize for their growing family from accessing more property options.
In the NSW government’s own proposal, stamp duty was described as a “volatile tax that puts a brake on economic growth”.
So, what will replace stamp duty?
Last year, then NSW treasurer Perrottet proposed replacing stamp duty with an annual land tax, which he said would help inject $11 billion back into the economy over the first four years.
He said that money would be put back into the pockets of the NSW people, which would help stimulate the economy as the recovery from the COVID-19 lockdowns continued.
“In the long run, the proposed reform would lift living standards,” he said.
“It is expected to expand the NSW economy by 1.7 per cent, or more than $10 billion additional annual income for NSW residents,” the consultation paper said.
“This would provide an extra $3,300 of income per household and 75,000 additional jobs.”
The new annual tax would be calculated on unimproved land value.
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.
Buyers would be given the choice of which tax they would like to pay; stamp duty or the land tax.
What if I already paid stamp duty?
You will not have to pay the land tax.
For those who aren’t in the market to buy a home, there is no change. There would be no double taxation.
Those who have already paid stamp duty on their property would not have to pay the property tax.
However, if you decide to move house you will then begin paying the land tax on your new property if you choose not to pay the lump sum.
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