Stamp Duty ‘Switch’ to Boost Housing Affordability – NFP
5 April 2016 at 9:59 pm
A partnership report by business and Not for Profit peak bodies has called for a switch from stamp duty to a remodelled land tax to boost housing affordability and jobs.
Making the switch from stamp duty to land tax would not only lower the cost of housing and reduce rents, but could also boost Gross State Product by more than 1 per cent and create up to 10,000 jobs, according to a new report from the New South Wales Council of Social Service (NCOSS) and the NSW Business Chamber.
Prepared by KPMG for the NSW Business Chamber and NCOSS, the report, Taking on Tax: Reforming NSW Property Taxes, outlines the benefits to the NSW economy of abolishing stamp duty on property transfers and gradually introducing a broad-based land tax.
The report said that in 2015/16, conveyancing stamp duty was expected to generate more than $8.6 billion for the NSW Government with a considerable share of this coming from residential property transactions.
“This is double the average received in the previous decade with the level of stamp duty
payable on the median Sydney house price now more than $40,000, around twice what it would have been a decade earlier,” the report said.
“As broad and diverse stakeholders, the switch appeals to each of us for different reasons; but each agree that it is essential that stamp duty and land tax remain an active part of any conversation about tax reform.”
Under the switch, property owners would be subject to a redesigned land tax, but would no longer pay stamp duty when purchasing a property. While NSW already has a land tax system in place, the current system is “narrow” and does not apply to owner occupied land.
Under the switch a “broad” land tax would apply to owner occupied land in addition to those who already pay it. The switch could be designed as “budget neutral” so that it could be implemented independently of decisions about the revenue and expenditure needs of the government.
NCOSS CEO Tracy Howe said the new modelling showed that the reform would create new jobs, boost economic growth, and most importantly, improve housing affordability.
“Our state and federal tax systems are a real and significant factor in the housing affordability crisis in NSW,” Howe said.
Howe said while improving housing affordability in NSW would require a number of strategies, switching from stamp duty to land tax would make a significant difference.
“It would remove the disincentive for people to buy and sell property, making it easier for households to move as their needs change over time, enabling better use of the existing housing stock and reducing the upfront costs of home ownership,” she said.
“It would also place downward pressure on rents over time as investors seek less return on their investment to cover their costs.
“At a time when housing affordability is reaching crisis levels the NSW Government should be looking seriously at this proposal.”
Howe said she was proud to be part of a partnership between business and civil society to come up with solutions to some of the state’s toughest problems.
“This report shows the switch to land tax has widespread support and that support is growing,” she said.
“While it would be a big change for NSW – and there must to be more work down on how the switch would be best implemented – this report makes it clear it’s a change NSW needs.”