Cutting stamp duty by 0.5 per cent would stimulate the property market and bolster state government revenue, the Real Estate Institute of NSW (REINSW) has claimed.
“Between 2003 and 2006, Western Australia cut property transfer duties by 0.9 per cent yet related revenues rose by more than $709 million over the same period, simply because the cut stimulated in the market,” the REINSW said.
“Similarly in the Northern Territory, property transfer duty rates were cut by 0.45 per cent which resulted in an increase of more than $22 million in related revenue.
“Put simply, increasing taxes means less money for government, decreasing taxes means more money for government.”
“What we need in NSW is equally decisive and innovative action from the state government to not only increase property transactions, but also to protect state government revenues.”
The REINSW said recent history proved that new taxes could undermine government revenue.
“We know from the bitter experience of the vendor duty that when you raise property transfer taxes you get a decline in government revenues.
“In NSW, a 2.25 per cent vendor duty resulted in a loss of over $1 billion in transfer duty in the only full year it was in operation. Importantly, in the first full year after the removal of the vendor duty, transfer duty went up by over $1 billion.”
The REINSW said a 289,000 drop in property transactions between 2003 and 2011, despite an increase in population, was evidence that the market needed stimulus.
“Our plan to cut transfer duty is a proven model to protect government funding sources and at the same time, light the badly needed spark to get the property market really moving again,” the REINSW said.
“The evidence is clear that additional stimulation of the market is generated by an easing of property transfer duty rates, providing greater incentives for buyers and at the same time, protecting revenue streams for government.
“The global economy remains in a dangerous phase and the impacts on Australia and NSW are uncertain.
“What we learnt from the GFC Mark I is that it was only innovative and coordinated policy action by governments across Australia that helped sustain and invigorate the property sector, which is the engine room of the national economy.
“Already we have seen the Reserve Bank take immediate and urgent steps to cut interest rates in order to stimulate activity. These cuts need to be reinforced by additional and wide ranging policy responses such as our stamp duty plan.”