NSW’s 2022-23 budget includes substantial changes to the tax code for property owners in the state, according to early commitments made ahead of the official release on 21 June.
Premier Dominic Perrottet has long signalled his intention to overhaul stamp duty on property purchases – an initiative he has announced he will push forward with in the latest state budget.
NSW’s proposal involves switching over to an annual land tax, which would be introduced at first on an opt-in basis for new buyers, and be locked to the property, so that subsequent buyers are obligated to take part in the new system.
On Monday (13 June), Mr Perrottet confirmed that he would move ahead with scrapping the tax – calling it “the worst tax that any government can have” – but conceded that it couldn’t be done without the support of the federal government.
Federal Treasurer Jim Chalmers has recently said that he was prepared to work with state governments to address the challenges in their budgets and, prior to the election, signalled his willingness to lead discussions with the various state leaders on tax reform. Ultimately, though, he acknowledged that specific adjustments were a matter for the states.
So far, only the ACT has implemented a major overhaul of stamp duty. The territory began its 20-year process of phasing out the tax in 2012.
Victoria’s state government is said to have examined the issue in detail, but has refrained from taking a public stance.
It’s decidedly not on the agenda in Queensland, despite tax experts and property industry insiders making a strong case for its consideration.
RSM partner and indirect tax expert Sam Mohammad, who is Brisbane-based, noted that Queensland’s budget release coincided with that of NSW, yet stamp duty was never on the table.
He said that tax experts generally agreed a transition to an annual land tax would make home ownership more accessible, support household mobility and better facilitate economic growth.
“While the proposed shift to an annual land tax is likely to result in a loss of direct revenue – with some estimates suggesting a 20 per cent reduction in annual revenue collected – the expectation is that the productivity gains and economic growth will more than compensate for the loss of revenue,” Mr Mohammad said.
In NSW, the shortfall in revenue is projected to come in at approximately $2.5 billion a year.
But the state is looking to make tax gains in other areas, proposing to double the surcharge on foreign investors’ land tax from 2 per cent to 4 per cent.
According to the Property Council of Australia’s NSW executive director Luke Achterstraat, the state is playing with fire if it wants to meet its target for encouraging the construction of 200,000 new dwellings over the next four years.
“International investment plays a critical role in getting many new housing projects off the ground in New South Wales. The surcharge is a tax on new development and a handbrake on new homes,” Mr Achterstraat said.
“The doubling of the surcharge also sends mixed messages to the international community and whether their investment dollar is truly welcome in New South Wales.
“The housing supply crisis in NSW will only get worse until we have an efficient planning system and a tax policy that promotes new housing stock.”
ABOUT THE AUTHOR
Based in Sydney, Juliet Helmke has a broad range of reporting and editorial experience across the areas of business, technology, entertainment and the arts. She was formerly Senior Editor at The New York Observer.