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Ray White’s chief economist Nerida Conisbee pinpoints a potential move from the federal government in reaction to NSW’s decision to implement stamp duty reform that could spur other states to follow suit.
The NSW government has announced a new plan in a bid to join the nation’s capital, Canberra, in phasing out stamp duty.
The Perrottet government’s move, which will allow “first home buyers who opt into the tax [to] pay an annual property rate of $400 plus 0.3 per cent of the land value of the property”, has the potential to assist 55,000 people each year.
However, this support comes at a significant cost, according to Ms Conisbee, who said a move away from stamp duty which accounted for 25 per cent of the state’s revenue last year.
Speaking on a recent episode for REB’s sister site, Smart Property Investment, Ms Conisbee opined that such huge financial losses are “why [the NSW government has] done it for first home buyers initially. It is partly because first home buyers do struggle to get the deposit together.”
“But ultimately, it won’t make a massive difference to the revenue that they obtain through stamp duty. They are moving very, very carefully and slowly. It is a change not just from the government revenue perspective, that it won’t just leave a big hole in the budget, but it is also a change for people to get used to.”
However, Ms Consibee said that aside from the impact the reform will have on first home buyers in Australia’s most populous state, the most important outcome is related to the Albanese-led federal government’s response to NSW’s action.
She believes that if the federal government can kick back some financial support to NSW, then it would spur other states into action and induce nationwide reform.
“I think the thing that will push other states to look at it more closely will be if the New South Wales government can get some funding relief from the federal government,” she said.
“And that’s the key, if that $2.5 billion hole is at least in part filled by the federal government. I think at that point, other state governments will look at it more closely.”
Adding that “because this is the biggest challenge for a lot of them at the moment, that it is such an incredibly important part of state revenue, and we know moving from stamp duty to land tax does result in more stable revenue, year to year, but it also results in less revenue year to year”.
Ms Consibee concluded that “if we do start to see the federal government provide some funding to the NSW government to provide this, to ensure this very significant tax reform, that other state governments will also look at it more closely than they have prior”.
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