It’S one of the most hated taxes in the country but debate has raged in the Illawarra this week over whether NSW should abolish stamp duty in place of an annual land tax.
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The NSW Business Chamber, the NSW Council of Social Services and the NSW Branch of the Australian Manufacturing Workers Union have combined to call for a tax switch, where property buyers would no longer pay stamp duty but a broad land tax would be applied to all owner occupied land.
Modelling by KPMG for the State Chamber and NCOSS shows the tax switch could increase Gross State Product by more than 1 per cent - currently equivalent to about $5 billion - and create up to 10,000 jobs.
AMWU organiser Daniel White said introducing an annual tax made sense, particularly for an aging demographic like the Illawarra which would allow people to move around easier.
“We’ve got elderly people who may stay in their house longer because they’re faced with the proposition if they sell and they buy somewhere else they’ll be faced with paying stamp duty, which is a pretty high consideration when buying a house,” he said.
The McKell Institute last month released a report calling for an annual land tax to the value of 0.75 per cent of land value to replace stamp duty.
This means a home owner in the Wollongong LGA would pay around $2100 each year based on a median land value of $279,000, as compared to buying a home valued at the 2015 median price of $550,000 with a one-off stamp duty of around $20,000.
Conveyancing Choice Illawarra director Angela McMinn said it needs serious consideration, noting some of her clients were concerned it sounded like a good idea in the short term but long term people could be out of pocket.
Mrs McMinn also said it wouldn’t greatly impact investors with multiple properties as they could claim the tax as a deduction, though the average owner-occupier could end up paying far more if they stayed in their home longer than 10 years.
Real Estate Institute NSW CEO Tim McKibbon was in Wollongong this week and added to the debate, suggesting stamp duty had to change but not to an annual tax.
“We have to be realists and acknowledge the government needs money to supply our services … but they need to raise money in a responsible, cost effective and equitable way,” he said. “The current tax rates for stamp duty were set 30 years ago and have never been reviewed.”
Mr McKibbon said when the tax was first introduced a $350,000 property was considered only affordable to the mega-rich, and should be adjusted accordingly to today’s real estate climate.
“Tax should be a consequence of what you do not a consideration of the transaction.”
Mercury Facebook user comments:
Gus Flack: “Can I have my stamp duty back then if I have to pay an ongoing land tax?”
Stuart Henn: “I've paid twice in about 4 years, bet I don't get anything back and have to pay land tax yearly.”
Michael Mackay: “If they get rid of stamp duty we could put so much work into our place?.”