It was great while it lasted – with more than six thousand first home buyers having their duty bills waived or reduced thanks to the NSW government’s temporary extension of stamp duty relief.
Unfortunately, as of 1 August, the additional relief came to an end, meaning property price caps for:
- Stamp duty exemptions fell to $650,000 from $800,000
- Stamp duty concessions fell to $800,000 from $1 million
However, good news. The tax could soon be on its way out.
The state government is considering reforming the property tax system, giving buyers the choice between paying stamp duty upfront or paying an annual land tax.
While the public consultation process has now ended, the proposed reforms generated widespread public support, according to a government progress report released in June.
And now the National Housing Finance and Investment Corporation (NHFIC) has done the sums, confirming you would be better off paying land tax.
Axing stamp duty increases housing mobility
The NHFIC’s Stamp Duty Reform: Benefits and Challenges report found “the typical household across all states (except the ACT) would be better off paying land tax on a median property than transfer duty”.
That’s because abolishing stamp duty would increase housing mobility.
To see how, let’s imagine you bought a median-price house in Sydney 20 years ago.
According to the NHFIC calculations, if you then moved three more times until the present day, you would end up paying more than 10 times the amount of duty than if you’d stayed put.
However, under an annual land tax, you’d be worse off only after more than 14 years – which is greater than the 12.4-year average holding period of a property in NSW.
“Households that are considering downsizing and upsizing, or just seeking more space when they are working at home during COVID-19, wouldn’t be penalised under a broad-based land tax compared with the current stamp duty arrangements across most states,” said NHFIC chief executive Nathan Dal Bon.
Other pros and cons of land tax
The benefits of axing stamp duty don’t stop there. It would also lead to more efficient use of the nation’s housing stock, and reduce state and territory revenue volatility.
On the flip side, property prices would likely increase in the short term – as the ACT experienced. However, if lenders added the cost of the replacement land tax into loan serviceability criteria, the price impact “may be negligible”.
Looking for a home loan? Get the expert advice you need by working with Newy Finance. Contact us by calling Jon Jones on 0410 699 969.