A recent review of Federal Financial Relations conducted by the NSW Government recommended that stamp duty be abolished and replaced by a broad- based land tax.
This has implication for all property buyers, not just those in Sydney, as it is highly likely that if these measures are shown to have increased demand,- which they most surely will- then the other states will rush to follow with similar changes.
In fact, the Victorian government has already introduced stamp duty savings ahead of July 2021, so it will be interesting to see what further changes they may make then.
That’s why anyone thinking of buying anywhere in Australia needs to pay particular attention to this information. For anyone already with property it has no effect on you.
So far, we know that in August 2019 the NSW commissioned a review of the state’s revenues.
The report was released in July 2020.
There were basically 4 options for stamp duty reform, two of which seem to be the most likely:
REPLACE STAMP DUTY AND LAND TAX:
either A: With a new land tax that has lower tax rates for owner-occupiers and higher rates for investors, OR
B: With a new land tax but at a progressive rate scale.
According to the report, there are four options for whichever plan they decide upon:
- Switch on sale. Stamp Duty is abolished, and all properties become liable for the new land tax at the point of next sale.
- Voluntary opt-in. At the time of property purchase the buyer has the option of paying stamp duty in full or opting in to paying the annual land tax.
- Credit for existing buyers. The plan is that existing buyers who purchased in recent years will be given a credit for the stamp duty they paid, based on a sliding scale depending on their year of purchase.
- Gradual phase in. Stamp Duty rates are gradually lowered over time with the land tax rates gradually increased over the same time.
There is clearly no perfect system, and there are still many issues to iron out, and it is likely some of these options may be implemented together in one form or another.
What is for sure for buyers is clear (at least to me it is!).
- Anyone who recently purchaser or is about to purchase is unlikely to be materially disadvantaged, so there is no need to worry.
- It will be easier for all buyers to get into the market.
