Dominic Perrottet to axe stamp duty in NSW Budget

Homebuyers in NSW would no longer have to pay thousands of dollars in stamp duty under a plan to be unveiled in next week’s state Budget.

Premier Dominic Perrottet will finally move to phase out the hated tax, which is paid to the state government by a buyer purchasing a home.

Instead of paying the stamp duty fee up front, buyers could chose to pay an annual land tax to the state government instead.

Mr Perrottet announced the plan to replace stamp duty with an annual land tax last year when he was treasurer, then dumped it months later.

Instead of paying the stamp duty fee up front buyers could chose to pay an annual land tax to the state government instead. Pictured: A home auction in Sydney

But in a second backflip on the issue, the reform will be included in Treasurer Matt Kean’s June 21 Budget, according to the Sydney Morning Herald.

Buyers will still be able to pay stamp duty if they prefer, unless the property they are buying has already been shifted to the land tax model.

This means stamp duty would be phased out over time as more properties switch to an annual land tax. 

The median average stamp duty in Sydney is $49,934. Details on how the annual land tax would work have not been revealed – but a previous proposal said a buyer of a typical $1.4 million Sydney house would have paid an annual bill of $2,400. 

Ken Morrison, chief executive of The Property Council of Australia, described stamp duty tax as ‘the worst thing in Australia’ because it ‘distorts behaviour, cripples job creation, lowers growth, and locks people into housing that might not be appropriate for their needs’.

Premier Perrottet, who has called stamp duty an ‘inherently terrible tax’, floated axing it when he was treasurer but then backed down saying he needed federal government support.

One obstacle to reform is that the NSW government rakes in 32 per cent of its revenue from stamp duty which was worth $12.2 billion in the 10 months to April 2022, according to Revenue NSW.

This has soared from 18.3 per cent 10 years ago as house prices skyrocketed.

NSW Treasury predicted switching to a land tax would collect about 20 per cent less revenue than the current system.

Labor opposes the move to a land tax, with the state election coming up in March. 

In the 2020-2021 financial year, $9.6 billion of stamp duty was collected.

Even with house prices tapering off in recent weeks, and even falling in some suburbs, the state government is likely to have taken in $14 billion in stamp duty by the end of the 2021-2022 financial year on June 30.

Monthly revenue from stamp duty surged during the Covid pandemic from a low of $450 million in May 2020 to a peak of $1.6 billion in October and December 2021.

The figure dropped to $976 million in April as house prices stabilised or fell.

Premier Perrottet, who has called stamp duty an ‘inherently terrible tax’, floated axing it when he was Treasurer but then backed down saying he needed federal government support

The state government will hand down its budget on June 21, when it will also reveal more about NSW’s finances overall.

NSW Treasury said stamp duty revenue changes from month to month ‘due to a number of market, economic and other impacts including the global Covid-19 pandemic’.

Mr Perrottet argued a land tax option would create 75,000 jobs and see 300,000 more people achieve home ownership.

But since that ‘progress paper’ was released in June last year, the Coalition failed to confirm whether this policy would even be implemented before the next election in March 2023.

The median average stamp duty in Sydney is $49,934. Pictured is an auction at Hurlstone Park in Sydney’s inner west

Shadow treasurer Daniel Mookhey told Daily Mail Australia that should Labor leader Chris Minns win the next election and become premier, stamp duty would be here to stay.

‘We are worried that Mr Perrottet’s proposal will lead to a forever tax on people’s forever homes,’ he said.

‘As inflation rises and rises, hard-working families will struggle to pay the premier’s land tax.

‘The average homeowner in NSW would have seen their land tax bill more than double in the past five years, if they were paying Mr Perrottet’s land tax.’

First home buyers can qualify for a stamp duty exemption for homes they buy for less than $650,000 while a concessional rate is available for properties worth up to $800,000.

The rule applies whether the home is brand new or existing. 

First home buyers don’t pay stamp duty on land worth less than $350,000 with a concessional rate applying up to $450,000. 

Sydney postcodes near the harbour earn the state a lot of money from stamp duty when they are sold. Pictured is a house in Vaucluse in the Sydney’s eastern suburbs

The last NSW Budget paper, released in June 2021, said existing stamp duty was stopping many younger people from buying a home.

‘Removing stamp duty, which is one of the principal barriers to home ownership, would lower the up-front cost of home purchases for all buyers,’ it said.

‘It would help to enhance household mobility, allowing more people to choose the right home for themselves and their families at every stage of life, without being penalised by stamp duty.’

The real estate industry wants stamp duty axed, but Tim McKibbin, head of the Real Estate Institute of NSW said: ‘We don’t see much point in getting rid of stamp duty and replacing it with a property tax.’

Mr McKibbin said that stamp duty inflated house prices and 40 per cent of the cost of new housing was taxes and charges from the three levels of government.