NSW Treasurer Dominic Perrottet is facing an uphill battle to remove stamp duty on the back of a frenzied Sydney property market.
According to 9news Federal Political Reporter Chris OKeefe, the treasurer’s push to remove the tax has made some MPs nervous due to the billions of tax dollars it will provide as the government aims to return the budget to surplus.
Federal Treasurer Josh Frydenburg has also ruled out helping the state government with direct federal support, leaving the NSW government in the precarious position of deciding between prioritising the short term economic status of the state or rolling back the tax.
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Stamp duty reform could cost the state government up to about $2 billion a year during the early years of it’s implementation, but there is an aim for it to be revenue-neutral long term.
Mr Perrottet has been a strong voice in the political discussions to abolish the tax despite swelling property prices that would net the government billions in tax dollars.
“Stamp duty is an impediment to purchase, it’s by far our country’s worst tax,” Mr Perrottet said when quizzed on why he is in favour of it being removed.
“We need a fairer and equitable system in place, and yes those changes can be difficult, yes they financially can cost the state, but ultimately, we want to make sure we give our young people every single opportunity,”.
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Despite the financial impact of the COVID-19 pandemic, recent data from the Domain House Price Report shows Sydney’s property market is surging past previous record highs. In the December quarter, the median house price in the state capital grew to over $1.2 million dollars, increasing 4.8% over the December quarter.
This figure is $13,000 higher than the previous median price record set back in mid-2017, with the Sydney suburb of Alexandria recording the largest median increase in 2020 to $1.9 million, a gain of 30.6%.
Speaking to the Australian Financial Review, Mr Perrottet insisted that removing the tax will help increase property turnover and assist first home buyers.
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“Paying stamp duty every time you buy ties people down and limits mobility, or shuts them out of buying altogether. As we move beyond the worst of the pandemic, this reform will help more people realise the Australian dream of owning a home and give the economy a much-needed boost.”
First introduced to NSW in 1865 at a maximum of 0.5 percent, the current 5.5 percent stamp duty tax rate entered legislation in 1986 and was targeted at the top of the market for house prices fetching 1 million dollars or more.
Treasurer Perrottet’s proposal to replace stamp duty with an “opt-in” property tax system has been one of his longstanding political goals, and the discussion paper regarding the topic has revealed it would save property buyers thousands by removing the lump sum payment.
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This would result in a much-needed relief for potential buyers looking to enter the market and previous stamp duty tax savings could be instead put towards a deposit.
If stamp duty is removed, the average Sydney owner-occupied home would pay $2391 annually in property tax, while the average for homes throughout NSW would be $1812 according to data provided by the Australian Financial Review.
Property sales could also be a big winner from this change.
Treasury department analysis suggests that the abolishment of stamp duty would substantially increase market movement with a potential of up to 100,000 more transactions occurring annually.
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Words by Rimas Veselis
- NSW plan to scrap stamp duty hits snag as property market booms , 9news Feb 8th 2021
- Quote from Josh Frydenburg, Payroll tax, stamp duty reform hopes dashed by federal government, Jun 6th 2020
- Quotes from Dominic Perrottet, Abolition of stamp duty would surge home sales by 50pc: NSW Treasury, Feb 5th 2021
- Domain House Price Report, Jan 30th 2021
- ‘Our worst tax’: opt-in stamp duty in tax overhaul, AFR, Jun 1st 2020
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