NSW Government Proposal to Scrap Stamp Duty and Replace It with Annual Land Tax

So finally liberal government in NSW introducing land tax similar to the United States of America and replacing one-off stamp duty with yearly tax that one has to pay until they own the property in addition to council and all other tax. This will also have major impact on those living on rent as the extra cost will be passed on to the tenant by the landlord.

Without going to the election they are introducing such a massive change is nothing but betraying the trust of people who voted for them..! Also, note that Mr Murdoch and lot of other people like him with vested interest support American property tax system and hence over coming days you will see many articles on radio, news and media in favour of the lifelong property tax system.

Yes, land tax is low upfront but the individual will end up paying way more than stamp duty over the life of property ownership as the land tax will increase every year once introduced, similar to what they have in the US.

This land tax will increase every year similar to increase in your medical insurance or increase in council rates which is always higher than CPI but your wage increase will always be lower than CPI.

Liberal wants to make sure that working-class people remain poor and rich remains rich.

Instead of taking it to the election, they are taking it to a consultation where all opinion will be reviewed by highly paid liberal mates who runs PR services and do community consultation business. They will pick and choose which feedback they publish and the outcome will be manipulated to make people believe there is massive support from the community…😎

Ozbargain community let’s vote and see what is a real bargain… a lifelong tax for your future generations or pay a one-off and never pay again stamp duty 🙂

Please make sure you provide feedback to your local Labor, Green and Independent MP to oppose this American system.

Liberal sees this as opportunity to make future changes to our health system to education system. If this passes through then you will see liberal after next election may introduce a system with option either opt to remove Medicare and save on Medicare levy …or pay high Medicare levy to get free Medicare….and slowly Medicare will be out of Australia..!

Update thanks to Mindsetraveller

This land tax means Investor can purchase a property without needing to pay stamp duty up front, 1,000's of other investors would feel the same; appetite for property increases whilst supply remains stable which only means prices go up.

As an investor, now that I know capital growth is likely, plus with low entry cost (no stamp duty upfront), rental income (might increase it $20 or so a week to help offset my yearly land tax), tax (negative gearing) considerations is good for me.

Those young and less wealthy purchasers who find it hard now - will likely find it more harder."

In addition Yearly tax means those young with poor income will now have to allow for extra expenses for the tax that means less shopping or holiday or spend on other activities which will have direct impact on businesses and hence deeper impact on socio-economic of entire system.

The winner of this new tax system is wealthy, property investor and real-estate agent !


External links

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Treasury NSW

Consultation page

Poll Options Fri, 01/01/2021 - 00:00

  • 191
    1. Life long yearly tax is better than one off stamp duty
  • 561
    2. One off Stamp duty is better than life long yearly tax

Comments

  • no brainer stamp duty is better. Property tax can be raised down the track….

    • +87 votes

      Stamp duty disproportionately affects the young and less wealthy. Saving a deposit while paying rent is hard enough let alone having to save for a big hit of stamp duty too.

      It also stops people from buying the house they can afford at their stage in life and moving later when their fortunes change. Why would you buy a one bedroom in your 20s if you're planning a family in your 30s and would have to pay a second batch of stamp duty. Same for empty nesters why would you downsize from a family home when you need to pay 10's of thousands of dollars stamp duty to move to a smaller more suitable home.

      Good riddance to stamp duty. If a land tax replaces it so be it. Perhaps those that purchased 15-20 years ago could use some of their enormous capital gains to pay it.

      • -16 votes

        if you buy $500k property for 5 year then you pay $17.5k SD. Now if you have land tax which for simple calculations we keep at 2.5% per year for the value of the property for 5 year with annual property value increase of 2% then at the end of 5 year you will end up paying $39k in land tax and then you sell obviously the cycle continue.

        in my calculation I kept land value 60% of property value so it is $300k.

        So land tax impact young and battlers more than wealthy… ! There shouldn't be land tax on PPOR but if they insist then they can keep it for investment property similar to Canberra but that won't reduce housing price or rent affordability.

        • +26 votes

          To buy that $500k property you now need to save $67,500 to have a 10% deposit rather than $50,000.

          How much longer will a poor person have to save to get that extra $17,500 while renting? How much will property prices increase in this time?

          PS: your percentages are way off. No ways there's a 2.5% land tax rate.

          • -18 votes

            @stirlo: hmmmm… poor person who think to buy $500k home with $50k deposit can certainly add extra $17.5k instead of paying $39k over 5 year in land tax… !

            • @SydBoy: Are you seriously suggesting any political party in this country would try to introduce a $6k to $20k per annum tax on 'average' people and expect to live to tell the tale?

              • @djkelly69: well liberals believing in taxing working class to give more concession and tax reduction to businesses (and business owners who do land deals for their mates).

                idea of land tax itself is an evidence that there is a political party who believe in introducing NEW yearly tax on every Australian (those who are wealth and those who are struggling to meet ends). Wealth won't suffer but those are not wealthy will suffer of any new tax.

                • @SydBoy: Not interested in the generic political discussion, just the economic discussion.

                  Seems like the proposed land tax would affect the wealthy or not wealthy fairly proportionally based on the value of their asset.

                  • +11 votes

                    @djkelly69: Let's talk economics.. (little bit i know not much).

                    Agree that tax is directly proportionate to value of the asset, however this is an ongoing tax that means a wealthy in would be able to afford it (as long as they stay wealth) and people who are not wealthy would have additional burden of tax on their income which means less spend for other items that may includes holidays or groceries or shopping which in economics affect the business and hence the tax has wider socio-economic impact.

                    If the tax was exempt for Owner Occupier then probably economic impact would be different as it doesn't affect people who just own home… it will only impact those with wealth and investment property.

                    • @SydBoy: You're exactly right.

                      This tax is like GST. They say it's fair because everyone pays in ratio with your purchase price (for GST) or land value (for land tax) therefore it's fair.

                      That's an example of equality in action not equity. An equitable land tax structure would increase as the value of the asset increased. A tax at a particular percentage to a poorer person takes up a significant portion of their available resources and very little for a well-off person. Not to mention a recurring cost in the thousands of dollars hurts people struggling to make ends meet and is a drop in the ocean to others.

                      • @jrowls: The land tax based on land value doesn’t seem ‘fair’ for owner occupiers as the land might go up in value, but the owner doesn’t benefit financially from that increase in value unless they are selling.

                        Someone could buy into an area when the land tax is affordable for their budget, a couple of years later if the land value goes up significantly, that tax could be unaffordable, especially as wages generally don’t increase at the same rate as land values. Unless it remains static ie the annual tax is always calculated based on the land value at time of purchase.

              • @djkelly69: For what it is worth, proposal is currently 0.3% of unimproved land (so should be less than people actually pay to buy land with a house) plus $500.

                So on the 500k example, assuming that is unimproved land value, it is $2k per year. Not cheap, far short of what OP is suggesting.

                • @steeevo: Now multiply that $2k with 30 to 50 year of ownership (doesn't matter if you change house as you keep paying forever) will results into $60k to $100k and that money can better be utilised for many other purpose including funding your own retirement.

                  Also this 0.3% is not constant forever, it will change the way now they are changing property tax without election.

                  • @SydBoy: The asset is part if the retirement plan. Take out an ELOC and live if that.

                    Another option is for owners to not live in the same house for 30 years.

                    • @whooah1979: Asset is part of retirement plan but money you paid for land tax could have also been used for retirement in addition to the asset.

                      • @SydBoy: Not paying taxes would be great but not sustainable. Someone has to pay for state services. I would rather have the asset-rich people pay for it than those on the other side.

                  • @SydBoy: The biggest flaw with your argument is assuming people should live in the same house for 30-50 years. If people are selling and buying a new house every 3 or 5 years land tax would be sgnificantly cheaper than stamp duty.

                    • @Telcius: Well people do live long term in the same house where they have kids and as you see many people here in discussing about old people living in 4/5 bedroom houses. Means people do live and settle one place for long-term.

                      First home buyers don't pay anything at the moment but under this law they will which you have conveniently ignored in your comment but i am guessing that is because agree that this new TAX will be disaster to first home buyer and younger generation.

                      • @SydBoy: Stamp duty is pretty big financial hurdle for the non-wealthy to buy a new property, I'd bet there would be significantly more property upsizing and downsizing if they scrapped stamp duty!

                  • @SydBoy: You also aren't factoring in the time value of money. Upfront dyanpdbuty saved could be invested to generate a return.

                    It all really hinges on whether people move house. If you are going to buy once and stay put forever, you are right that upfront stamp duty is probably better for you (though even then, maybe not due to the ability to invest the stamp duty).

                    The moment you are moving a couple of times, land tax is way better.

                    I am on my third place, having moved through I think a pretty typical cycle.

                    Got married, wife and I bought an apartment in Sydney. Paid $21k in stamp duty. Note that this was a small apartment in Sydney, but didn't qualify for any stamp duty or first home buyer relief.

                    A few years later, having saved up and expecting a kid, moved further from the city but into a house (closest we could afford). Paid another $35k stamp duty.

                    Roll forward another few years, having diligently saved up more and hating the commute to the city, sold and bought a new house that saves us 30 minutes commute each way every day, also near better schools for our growing family. Paid another $57k in stamp duty.

                    So in less than 10 years I have paid close enough to 100k in stamp duty. Under the land tax proposal, I would have paid maybe 20k (haven't done the maths) and would be free to sell and move again if a better opportunity for my family came up.

                    Stamp duty sucks massive donkey balls if you want people to be able to move housing to match their stage of life.

                    • @steeevo: You also ignore the fact that first home buyer pays this tax when under current stamp duty they don't.

                      second in your scenario you didn't consider housing bubble that will grow as a result of land tax and that means more land tax under current proposal.

                      you also didn't do maths for the money could you save on land tax which could have been invested wisely and created better return for yourself…

                      Also you didn't consider the fact that not many people jump house to house every few years with or without stamp duty as the post says working class people on low to medium income will suffer not the wealthy who has appetite to change house every now and then.

                      yes agree with you that land tax is beneficial to people to be able to move housing in other words more property investor in the market who can buy more houses without paying stamp-duty including foreign buyers which in turn increase property prices and rents as tax has to be paid by someone… ! if rent won't increase then those tax goes as deductible expense for investor which basically means other tax payer foot the bill … !

                    • @steeevo: For the discussion, if the state is missing out on $80k revenue form you, that will need to be covered somewhere; if it is to be covered in land tax, the property you are selling would be worth less, (if it still has taxes owed on the purchase) and the property buying (if $0 taxes owed) worth more. potentially the same $$ out of pocket.

                      Agreed $100k in taxes = massive donkey balls.

                • @steeevo: in California, the land tax rate is 1% of land value. Just so you know where we're heading.

                • @steeevo: Yes but you have to look at this governments track record, assuming you purchase a house for 500k, the government will then asses that a $3m worth of land and you are stuck with a $90k tax bill every year.

            • @SydBoy: Whilst your correct, do you think people in that position are taking future costs into account?

              Why do you think credit cards and pay layer services (Afterpay etc) are so popular?

              Yeah it may cost you more, but that's tomorrows problem. So many people live paycheck to paycheck and would rather save that $17.5k right now.

          • @stirlo: First time purchases are stamp duty exempt. And one else shouldn't be renting unless shit went really wrong.

            • +20 votes

              @Slippery Fish: They’re exempt because it’s such terrible tax that no one could buy their first home with it in place.

              What happens when you move from your one bedroom starter home to a family home? Or the empty nester that moves and makes room for a new family in their old family sized home? What about if you had an exiciting career opurtunity that required you to buy a home in a new area. Or got divorced and had to buy a new place. There’s so many situations where stamp duty makes peoples lives harder than it needs to be.

              Also not everyone can afford to rent and save until they can buy a family home as their first and only stamp duty exempt home.

              Stamp duty is a terrible tax and we should be glad someone’s had the balls to try to fix it.

              • @stirlo: I bought a 4 bedroom for under 200k where I live :)

              • @stirlo: all along you mention that poor young people can't buy home due to stamp duty and now you are talking about people buying house every stage of their life … !

                It's Ok in democracy you can support what you like… no need to make up stories !

                • @SydBoy: Yes, stamp duty is bad for everyone except old rich people who have retired to mansions. For everyone else it’s terrible

                  • @stirlo: And first home buyers. We just went over this.

                  • @stirlo: Stamp duty is also bad for investors as it makes property less liquid. Being able to buy and sell land without stamp duty would make properties more of a commodity and affect our housing market. This as a big negative to me as I believe housing should be to house people first and as an asset last.

                    At the very least we should implement some measure of foreign investor stamp duty so the average Australian family doesn't have to outbid wealthy foreign investors for a house.

              • +3 votes

                @stirlo: I think the cost of the house\unit\apartment\box is the limiting factor combined with what banks are willing to lend to the average person these days is the issue, Australia is overpriced for the crap they build.
                The SD is minimal in comparison to the high cost of housing in Australia, also if its free for first home buyers then that at least gets you in to a place and build equity (hopefully).
                The idea of an ongoing tax on a property every year on top of every other tax and thing I have to pay (rego, various insurances etc) is already enough.
                The money will be mismanaged either way so it doesn't matter, They've just seen with COVID the drop in revenues and are worried about their pay rises being impacted.

              • @stirlo:

                Stamp duty is a terrible tax and we should be glad someone’s had the balls to try to fix it.

                How is it a fix when the replacement is an ongoing land tax (totaling much more than the one-time stamp duty)?

          • @stirlo:

            To buy that $500k property you now need to save $67,500 to have a 10% deposit rather than $50,000.

            … what?

            10% of $500,000: $50,000

            10% of $517,500: $51,750

          • @stirlo: If the person is "poor", then s/ he should really get professional independent financial & legal advice before signing into something like buying a house.

            In contrary to popular belief, owning a house property is not necessarily the "best" option for all.

            If they can't even save up the extra $10k $20k, then they really have to wonder whether s/ he have the ability to pay for special levies or significant repairs down the road for the property amongst other contingent costs.

          • @stirlo: IDK if you coudl get a mortgage with 10% deposit these days

      • @stirlo I agree with good riddance to stamp duty idea 100%

        As a residential property investor this is fantastic!

        This means I can purchase a property without needing to pay stamp duty up front, 1,000's of other investors like me would feel the same; apetite for property increases whilst supply remains stable which only means prices go up.

        As as investor, now that I know capital growth is likely, plus with low entry cost, rental income, tax (negative gearing) considerations is good for me. Those young and less wealthy purchases who find it hard now - will likely find it more harder.

        • It’s easier for a young family to find $30 extra a week than it is to find $30,000 up front for stamp duty.

          Investor doesn’t care if it’s $30,000 up front or $30 a week they already have wealth to draw upon to make the payment

          • @stirlo: I feel like this hypothetical get's raised a fair bit, you'd think that this "young family" would have some sort of planning it i.e. would have a bought a place that suits at least their medium term needs - capable of raising a family. In which case that first purchase should have been exempt from stamp duty as a first home buyer (assuming the property is less than the threshold).

            Realistically, what "young family" who buys their first home thinks hmm I'll just buy a 1 bedroom or a studio as a married couple, that'll be enough right?

            • @Kikkoman56: Everyone who's been beaten down enough with the stories about you can't have it all and stop being so greedy (that's reserved for the boomers) and to start small (as its the only thing you'd be able to afford anyway) and work your way up the hard way like the boomers did?
              I've had people tell me that I should accept 2hr commutes each way to get my foot in the door for a small 1-2br apartment, that I was just entitled if I wanted more at my age.

          • @stirlo: I accept that it is easier for a young famly to find $30/week than $30k up front

            BUT

            If prices go up by $30k? then the young family pays $30k more (because investors like me are keen as hell to buy more, and remember stock levels are quite stable right now) and then they pay $30/week additional for this new tax.

            As I said, I am all for this new method.

            Just be wary that it may not be what it seems esp if you are the group who find upfront stamp duty as an unfair tax.

          • @stirlo: But what about the existing stamp duty exemption for the first home buyer? How this going to be done with land tax?

        • But isnt it like pumping more air into the housing bubble ?

        • The reality is this will mean you pay more not less, but you pay it annually instead. The overall cost of an investment property will be increasing and with it the need for higher rents to cover costs. Don't get me wrong I think they do need to evolve to this model, but no way in hell is this going to be a big benefit for investors.

          • @gromit: Afaik we have not seen what the annualised tax rate is going to be and how it applies to multiple properties

            That said if I bought 2 x $500,000 investment properties today, I would be forking out around $35,000 in stamp duty.

            Let's assume the new tax is applicable on "land value" which council rates are based on for example, then say my land is worth $600,000 in total, and it is 1% per year (and even that loooks high). That is $6,000 per year for both properties. Remember that 1. this $6,000 is deductible as an investment for a start - and any mum and dad loves to try and negative gear property.

            If I keep these properties for six years, then I break even because it is $6,000 x 6 years.

            At this time, my properties may have gone up from $1m combined to say $1.2m combined.

            • @TheMindsetTraveller: You have a lot of whatifs and maybes there. I also own properties. At the moment the SD is part of the capital cost, so for a renter it effectively gets passed on at ~5% (so renters would be covering $1750 a year as part of rent). With a tax based on land value per annum you would need to pass on that full cost to the renter as it is a recurring annual cost. So yes your 6k is much higher than reality (I hope) but it going to have an impact and my biggest fear is this change will simply make for an easy piggy bank to raid for any overspending government.

      • Without stamp duty means the house prices will increase in general.

    • Stamp duty is literally the least efficient tax we have in Australia. It discourages the efficient use of land, and makes moving house significantly more expensive.

      It doesn't makes sense that such a huge tax is paid based on when people move - the burden is unfair. It discourages people from downsizing meaning that appropriate accommodation is not made available to families. It also discourages people from moving when they change jobs, so they are stuck driving across the city - worsening congestion.

      Good riddance to Stamp Duty.

  • The proposal would give home buyers the option of paying a large lump sum upfront, similar to stamp duty, OR an annual property tax.

    (emphasis added)

    https://www.smh.com.au/politics/nsw/how-nsw-s-proposed-prope...

  • The proposed NSW yearly tax on property is nothing like the tax in USA. In the states the property tax covers all local services - Police, Fire Brigade, Schooling etc etc

    • What do you think stamp duty pays for now? All those services are provided by the state governments and a good chunk of the state government's revenue is stamp duty.

      • FYI in the US it is at a local level, like your township, NOT state or federal level.

        That is why there is such a disparity for some areas being poor and getting shit services and education, but richer areas get schools that have 20,000 seat stadiums even though they are both in the relatively same areas (same city even).

        Having said that, the OP OP did say "similar to the US", so I doubt this will happen in Australia.

        • In the United States, property tax on real estate is usually levied by the local government. The national government levies no real estate tax, nor property tax. State governments levy 3% of the total property tax collected.

          So in NSW we will end up paying council rates and property tax which over the time will be in excess of 3% similar to USA but in major difference in usa is that tax on property is deductable expense in your income tax so what we end up having is worst then USA.

          • @SydBoy: Your sentences make no sense.

            The US governmental structure isn't particularly good and we shouldn't be trying to emulate it. Their equivalent of local councils run police and schools, which is a terrible idea and causes no end of problems for them.

            Whether it's tax deductible or not is irrelevant, the US tax system is very very complex and hard to understand.

            • @Zephyrus: Well we are partly adopting their practice that includes property tax proposed here by liberal national government.

              Liberals always oppose to Medicare and free education so day's are not far away when they make a low to remove Medicare and free education.

              • @SydBoy: Both sides of politics want to remove stamp duty, the move to remove it in the ACT was a Labour government move.

                Stamp duty is a terrible tax that disincentives people moving as their lifestyle changes. A broad property tax is the best way to achieve this with the tools available to the state governments.

                • @Zephyrus: This tax will only help property investor, property flippers and of course the government but it is big disincentives to working class family who wants to ends meet after paying their taxes.

                  today first home owner pays no tax at all under $650k so nothing under stamp duty stopping people to enter property market.

                  in proposed system first home owner will end up paying tax as soon as they buy property forever, which reduce their ability to spend on other essential items.

                  yes banks, mortgage brokers, property investor, property flippers and all those wealthy people will now buy more property with less upfront cost and result will be poor for working class austrlian mom and dad.

                  if liberal wants then why don't they make this tax only for property investor and owner occupier remains exempt from the tax?

                  • @SydBoy: Part of this proposal is getting a straight grant instead of a stamp duty exemption. This is actually much better for first home buyers as first home buyers often have low savings but good incomes.

                    Just taxing investors would be too high, there just isn't enough money there to make up the shortfall.

                    Personally, I'd be in favour of increasing income or company taxes instead, but the state's can't levy those and the Federal government isn't willing to pipe some of that money down to the states.

                    • @Zephyrus: well in 2008, Labor provided free money to people to buy existing houses/units which i believe was 25k then 14k. What happened was the units in western Sydney that i used to live was $280k before the grant announced become $325k after the announcement.

                      so these grant doesn't help first home buyers on the contrary they will pay more for the unit or house they want to buy and then keep paying land tax for rest of their life.

                      developers, builders and vendors smart enough to take grant money and ask more as they knew people without financial skills will buy anyways… !

                      if you look at current situation, then first home buyers gets not stamp duty cost and they pay market rate for property.

                      • @SydBoy: Look next time I'll vote Labor, so go away with your BS, you are quoting figures pulled out of your rear end. No one is quoting 2.5% to start with, unless its some labor aligned mouthpiece trying another mediscare campaign.

                        You are just trying to stir up shit. BTW the election is some time off so why are you bothering.

                        A true Troll post. Its a concept that will need work on. And BTW the Libs dont control the upper house so BS figures like 2.5% wouldnt even be proposed.

            • @Zephyrus: Nypd is bigger than the Nsw police but their commissioner is paid far less.

            • @Zephyrus: Dumb people tend to find everything complex and hard to understand.
              The key is to shut up, listen/ read and learn.

  • That was a painful read on so many levels. If you want to rant can’t you just create a blog or something.

  • … is betraying trust of people who voted for them.

    As if this is new by any political party…
    FWIW I dont vote for any of them, they are all full of lies and corruption.

    They all want to make sure that working class people remains poor and rich remains rich

    fixed it for you.

  • +7 votes

    It's good for Teasury bureaucrat who gets a more predictable abd controllable tax revenue, and it's probably good for real estate agents commissions because it makes house flipping easier. So it's a win win for them, as usual. For me I have no desire to start paying a new tax, so I'm not going to opt in.