NSW Premier Dominic Perrottet has conceded his radical plan to overhaul stamp duty and introduce a broad-based land charge is dependent on federal government assistance, while the opposition warns the change would create a new, never-ending tax on families.
The Herald on Monday revealed that Perrottet’s long-held goal of reforming stamp duty would be a key element of next week’s state budget, with some home buyers to be able to opt in to an annual land tax rather than be hit with the upfront payment.
NSW Premier Dominic Perrottet says he needs the help of the federal government to reform stamp duty. Credit:Oscar Colman
Responding to the revelations, Perrottet on Monday said stamp duty was the worst tax a government could impose and argued removing it would help first home buyers enter the housing market.
However, he said NSW could not go it alone with the reform, which would cost the state government billions of dollars in revenue.
“It is a massive impediment for people getting into the housing market, but the reality is that state governments can’t do away with stamp duty without support from the federal government,” Perrottet said.
“Stamp duty is a tax I’d like to remove, we need to do so with the support of the federal government.”
But Perrottet said he was yet to reach a formal agreement with the Commonwealth government over the reform.
Opposition treasury spokesman Daniel Mookhey said Perrottet should scrap the plans, which would only impose more taxes on NSW families.
“I don’t know where Mr Perrottet thinks that working families can find the money to pay him an annual land tax on their home that lasts forever,” Mookhey said.
“If Mr Perrottet thinks that families have more than $2000 sitting around ready to pay him a land tax, then he’s out of touch.”
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Asked whether Labor had an alternative policy to address the challenge of home ownership in NSW, Mookhey said the opposition would present its plan before the state election in March 2023.
The decision to move to a land tax would be permanently locked to the property, so future owners would have to pay the land tax if a previous one had, which would eventually lead to stamp duty being phased out across NSW.
NSW Treasury has estimated that an optional annual tax would collect about 20 per cent less revenue, which equates to a projected shortfall of about $2.5 billion a year.
But Perrottet said the post-pandemic era was the right time for governments to pursue tough reform.
“For way too long in this country we have not had reforms that we had under the Keating era and the Howard era, they’ve all sat in the too hard basket,” he said.
“Here’s the opportunity right now as we come out of a one in 100-year pandemic, there are economic challenges coming our way, we know we’re into a higher inflationary environment, and we need to continue to reform to unlock opportunities into the future.”
Federal Treasurer Jim Chalmers has said he is open to a collaborative approach to tackling housing affordability ahead of a state treasurers’ meeting in Brisbane on July 22, where reform options to boost the economy will be on the agenda.
Committee for Sydney chief executive Gabriel Metcalf said phasing out stamp duty was the most important reform that the state government could embark on.
“Every major study on the tax structure identifies this as a key opportunity,” Metcalf said.
“The problems with stamp duty is that it’s a tax on moving home. It’s a discouragement for properties to transact – which means that it makes it harder for people to adjust where they live based on things like changing family size or getting a new job.”
Data from Revenue NSW shows the government collected $12.2 billion from land-related transfer duty in the 10 months to April 2022.
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