NSW Stamp Duty + Annual Land Tax Proposal

So the NSW Govt have completed the public submissions. Now they have compiled a report into the proposed changes to stamp duty and land tax where "up front" duty would be largely phased out in return for an annual "land tax". It doesnt mention numbers.

https://www.nsw.gov.au/sites/default/files/2021-06/property-tax-progress-paper-june-2021.pdf

Its a bit of a spin job with many repetitive comments about making property affordable but this also seems the case for flipping and profit making so it could be highly inflationary since stamp duty acts as a barrier to entry by making buying additional property costly. No negatives are mentioned. Given that a investor often needs to SAVE $30K or more for duty removal of this hurdle is a major incentive for peopel to buy and sell quickly and flip renovated properties. This may harm first buyers and lower income persons disproportionately.

The proposed annual tax would be indexed annually based on GDP but have a embedded rate to limit future government raising the rate.

The proposed "opt in" rule is maintained. Once a property is subject to property tax it would not be subject to stamp duty again. In time most property may be opted in. However some property types and buyers may be refused access. They have also identified a need to "map" existing duty and land tax concessions to revised concessions under the annual tax model. A further concern raised is inherited property.

Foreign persons would (somehow) not be permitted to use the annual tax regime AND would also face annual property tax AND surcharges.

The state govenment is considering a loan scheme to allow eligible persons (eg retirees) to defer unpaidannual tax which is recovered on sale. It would be a "hardship" based approach.

Mortgage brokers have raised issues surrounding servicing calcs and lender assessment and how this may be addressed on a property by property case basis. The opt in rules may allow a person who buys paying upfront duty prior to the policy being implemented to them opt in and pay annually with a refund. Brokers queried how that may work.

Tax bodies have submitted that tax agents cant presently advise owners and suggested legislatioon to enable them to support owners may be required.

Submissions are open to the public by email before 30 July 2021: [email protected]

 

Hmm... interesting time for property owners of NSW?

 

They will clearly bring it in after one of the biggest growth periods in history, not start it after the next "correction"......

The current stamp duty has been a massive windfall for state governments in the last 30 years the way the revenue has increased.

Our next PPOR will likely be our last (holding for 20+ years hopefully), our average ownership has been 15 years between moves, so we will disadvantaged by this change

 

Update - NSW Treasurer walks back from Perrottet’s push to overhaul stamp duty

Not great news to those that are waiting for progress. One of the sticking points was always the immediate imapct on Treasury revenue by deferring much of the tax

 

Rate uncertainty changes the cost of funding state spending while waiting for annual land tax revenue to catch up?

 

And this afternoon the former Treasurer (now Premier) says its not out of question.
NSW stamp duty: Dominic Perrottet commits to reform despite Matt Kean’s lukewarm support

 

Have the proposed changes to stamp/transfer duty - namely the option to pay an annual property tax instead - become law yet?

 

No

 

Hasnt progressed far other than some consultation. Normal I would be expecting a change of this magnitude would be part of a budget. State budget is in June. 30 January was the closing date for internal policy submissions concerning the next budget.

The biggest hurdle to the proposal was the financing and funding shortfall which affects the Commonwealth as well. Unless NSW Treasury proposes to finance it by borrowing.

 

The hype around the proposal as died down too. Unlikely it will ever happen I think

 

One way would be to phase it in so that Year 1 only properties worth less than say $600k can opt in, then raise the threshold by 100k per year. By the time you get to 1M there will be a clear tax stream to counter the loss of SD.

 

Anyone else think the NSW government will push this through once interest rates rise and the market turns?

 

If rates rise this would cost the government more though. They have to fund the shortfall with debt.

 

As in their own borrowing costs will increase as well? That's a good point.

I was more thinking that it might be politically popular for them to prop up the housing market in the short term with people thinking 'great i dont have the upfront cost of stamp duty now', and that would play well with the voters that own a home?

 

My crystal ball tells me that Dom Perro would more likely announce after the next State election because atm there are too many projects going on (flood, covid, toll roads, trams, budgets and etc ...) and on top he still has to look after 7 small children

 

It was announced (leaked) over the weekend that under Turnbull / Scomo there was a hidden treasury whitepaper that planned to abolish state land taxes. A range of options were proposed and considered which included a option to choose EITHER CGT discounts or neg gearing, implementing higher annual taxes on all land in place of rates and higher GST. The UK style of limited deductions for neg gearing was also a feature. However when the ALP announced its own CGT and neg gearing policy they weaponising it by ditching the proposal and sealing it away in a safe and opposing the ALP.

I have long beleived that the issue of tax reform would need to consider a higher rate & broader impact of GST as well as reduced neg gearing and CGT benefits. Its merely a matter of time. I can even see the ALP winning a election and declaring the budget to be far worse than predicted and implementing urgent tax reform. ie Broken promises . It will depend how much control of both houses they achieve.

 

When he's in opposition? Odd!

 

I think his proposal was just a smokescreen for a Commonwealth proposal to follow. "Reform" ...I think ScoMo is back pedalling as he cant win a election with tax reform on the cards. Albo will attack it. Perrott's proposa is testing the waters perhaps ? In a "safe" Liberal state at the time under Gladys

 

There's two parts to this - and I agree urgent tax reform is needed.
Whether ALP will win Federally or not is the big question for me. I don't know how indicative the SA polls are.
Federally, the ALP can't seem to distinguish themselves in a positive manner. I can't stand ScoMo but he's about to throw the $$$ around ...

 

we have different ball then