NSW home buyers still paying too much tax
LAST financial year NSW property buyers paid $9.8 billion in stamp duty after a record 228,000 sales. Close to $3 billion has been paid by buyers since July.
This stamp duty is paid by the already stretched Sydney property buyer to the NSW state government based on the price of their land and the building acquisition.
The tax has been stuck at the current 4.5 per cent level since the 1986 Unsworth government, a time when the median stamp duty paid was $1500.
Given the rise in the median Sydney property price over the 31 years since, the typical buyer now pays $36,000 duty for a $905,000 median dwelling price acquisition.
Stamp duty affects affordability by making buying a home dearer, especially for first home buyers.
It has emerged over recent times that stamp duty also leads to the inefficient use of housing by constraining the capacity of many to move towards downsizing into a more appropriately sized home or for workers to take advantage of new employment opportunities elsewhere.
Many tax reviews, including the Productivity Commission’s recently completed five year productivity review, have proposed that the one-off stamp duty be removed and replaced by a universal land tax paid annually on all properties. At the moment only some investors pay land tax.
This universal land tax differs from the current situation in that it would apply to all properties, residential and commercial, whether they are owned as an investment or by an owner occupier. The Henry Tax Review in 2010 proposed such a land tax.
More recent AHURI research modelling of a universally applied land tax forecast 46 per cent of the land tax revenue would be raised from land plots within 10km of CBDs where land is most expensive, while only 4 per cent of land tax revenue would come from the urban fringe 30-50km out.
AHURI went further suggesting as a consequence of introducing the tax, overall land values would decline leading to more affordable housing.
Political reality dictates that changes to stamp duty and land tax would be implemented over a long time frame. This is happening in the ACT where stamp duty is being abolished progressively over 20 years having started from 2012.
Any move in NSW from stamp duty to land tax would involve transitional arrangements so that landowners would only begin paying land tax if they have not already had to pay stamp duty, i.e. as each property is sold it would move onto the new land tax arrangements.
It has been concluded that during this transitional phase the revenue shortfall experienced by state and territory governments would require bridging finance from the Commonwealth Government, although this revenue shortfall will quickly recede as more and more owner-occupied housing joins the universal land tax base. Our politicians have yet to bite the bullet, and perhaps never will.
Source Daily Telegraph Jonathan Chancellor