23 May Should NSW Abolish Stamp Duty?
Stamp duty is by far one of the most reviled taxes in the entire country.
Many people have been locked in heated discussions about the idea of replacing the stamp duty with a land tax and to settle the specifics of the idea, there have been extensive calculations done to get a grasp on the most likely economic effects.
If stamp duty was replace by a broader land tax, with the latter only being about 0.75% of the land value, then experts have predicted that property owners would pay an annual payment of slightly over $2000 a year in Wollongong (based on a $279,000 median land value).
The debate has involved agents from the NSW Branch of the Australian Manufacturing Workers Union, the NSW Council of Social Services, and the NSW Business Centre.
Across the board, representatives from the council, union and business centre have all expressed majority support for the proposed tax adjustment.
If the change were officially enacted, then the the resulting changes from stamp duty payments to land payments would be in effect for every individual land owner or land owner equivalent in the country.
Increase in Gross State Product
Groups of data examiners from the KPMG for the State Chamber and NCOSS have come to the collective prediction that the stamp-to-land tax change would result in a notable boost in Gross State Product.
If the ultimate results were congruent with the suggested models, the estimated increase would be about 1% overall.
Even though 1% may appear to be a minor figure for the less-informed, in the context of Gross State Product, it would equate to over $5 billion. An increase of $5 billion in Gross State Product could potentially lead to job creation numbering upwards to 10,000.
Potential Benefits for the Elderly
One of the primary arguments for the stamp tax replacement is an ethical one, primarily concerning the ease relocation for the elderly population.
According to Daniel White, an AMWU organiser, the annual land tax would give ageing people slightly more leeway for relocating without being intimidated by brutal stamp taxation.
One-Time Payment Versus Annual Payments
In a report submitted by the McKell Institute, arguments for the change from stamp taxation to land taxation were expressed. In a hypothetical formula posed by the McKell report, a home owner that is currently made to provide a one-time $20,000 payment for stamp duty (based on a median home price of $550,000) would now be paying an annual ongoing fee of $2100.
Potential Long-Term Consequences and Solutions
Naturally, there have been some who have proposed potential drawbacks to the apparent allure of making annual payments instead of a one-time payment.
Angela McMinn, Conveyancing Choice Illawarra director, has voiced that a number of her clients are wary of the fact that annual payments will collectively outweigh the one-time payment in the long-term.
Though investors might be able to absorb the costs through tax deductions, the average owner could wind up cumulatively losing much more money over the years.
Considering the deceptively expensive caveat presented by annual payments in the long term, people such as REI NSW CEO Tim McKibbon have suggested that the change from stamp duty needn’t necessarily be an overhaul into an annual payment model.
Certain properties that were once only feasible for the extremely wealthy (when the change was first suggested) are now within range of those of more modest means.
While the change is certainly called for, McKibbon states the suggested reform should be adjusted to fit the current climate of the real estate market.