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…šŸ˜Ž

Ozbargain community letā€™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 šŸ™‚

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 ā€¦or pay high Medicare levy to get free Medicareā€¦.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

Please sign & share petition https://www.change.org/p/gladys-berejiklian-stop-nsw-liberalā€¦

Treasury NSW

Consultation page

Poll Options expired

  • 192
    1. Life long yearly tax is better than one off stamp duty
  • 564
    2. One off Stamp duty is better than life long yearly tax

Comments

        • +1

          Your spinning the BS.

          Under the proposal First Home Buyers get a grant.

          They can elect to spend that on stamp duty or keep it and elect to take property tax.

          Its their choice.

          And you are again theorising on tax increase.

          There is nothing guaranteeing Stamp Duty couldnt rise either.

          So stick your fear mongering up your jumper.

          Likewise your speculation that prices will go up because buying a house is cheaper.

          But wait isnt this new tax going to be as you declare worse?

          You have constantly said it was 2.5% when its NOT.

          And you can choose what suits you. If you think you will be there for a long time, just take stamp duty. If its going to be flipped after a few years go property tax.

          Like your BS survey. which just shows if you are buying long term which most expect to do. Elect for stamp duty.

          You duck and weave, spin lies. You sound like you could get a job as a Pollie or a staffer, unless you are already employed there.

          Finally - its a proposal to get people to think about it.

          But no you are so anti one political party you just dont want to listen.

          BTW I have no idea which would be better, but I would love to read discussions based on facts, you arent presenting those facts at all.

          • -4

            @RockyRaccoon: Your anger shows you convinced that this is a TAX on people who currently pay no tax.

            Second of your thought that there is choice is again not true as this is all about phasing out stamp duty so there will be choice for next few years and then there won't be any choice. Everyone pay tax forever.

            Stamp duty don't rise to 300% like the tax i calculated using your figure of 500+0.3%.

            Regarding the grant First home buyer get is only $25,000 which is not good enough to cover the cost of life time tax of $100k+ they will pay through this new TAX.

            Also during Mr. Rudd time he distributed free grant money to buy property of $25k to $14k and results was that property prices increased overnight and people end-up paying more. Vendor, real-estate agent and developer smart enough to pump up the prices overnight.

            You can choose what you want ant support the bill as it will help you get more real-estate commission or mortgage commission or more property flips…but that doesn't change the fact that this is a TAX on every working class Australian mom and dad who is going to buy house in future and once the option to choose between Stamp duty and Property tax removed then future generation will live under the burden of tax.

            So basically you duck and weaven, spin lies just to comfort yourself but didn't disagree that people will pay $101k to $127k tax on the property under the new property tax.

            So finally this is just about the fact that this tax if passed will impact first home buyers and they will pay dearly for rest of their life but you are so like one-party that you just support anything they propose.

            • +6

              @SydBoy: You misunderstand my "anger"

              I am angry that you are telling porkies and not letting a fair discussion on this proposal.

              Both political parties can come up with good ideas just like they can come up with bad ones.

              This one is being floated so we can look at what benefits and what negatives there are.

              Stop putting out that its a "tax" on working class people. The existing tax is the bloody same, so thats irrelevant. Emotive BS again.

              If its a greater tax, thats a different story. And how can we assess that when you blatantly misrepresent the tax as proposed.

              at 2.5% its a rip off, BUT its NOT 2.5% and nowhere near it.

              You'r ea manipulator using emotive BS - Why are you doing this, thats what makes me angry.

              And you like any one eyed party supporter (of either political persuasion) attack anyone who calls you out for untruths. You should be ashamed that you cant tell the truth and let people make informed assessments.

              • @RockyRaccoon: This whole thread is fearmongering and misinformation. Thanks for calling out OP. Baseless claims….

              • @RockyRaccoon: I provided you calculation for 0.3% and you didn't even mention a single word about it and keep bringing 2.5% .. lol that means you agree that this is a TAX that people will pay all their life and it will be way more than current stamp duty.

                You are not providing any evidence that 0.3% won't change and neither is provided by the government which means there is no guarantee that it won't be 2.5% in future.

                Also as explain above with 500+0.3% the cost is way more than 300% to stamp duty cost and it is a TAX as it will be paid every year similar to what we pay now.

                You can support this TAX as it provides financial benefits to yourself but that doesn't mean everyone else should do the same.

  • +2

    Stamp Duty was always a bad tax for many reasons. But State Govts were never going to get rid of it while real estate prices were going up.

    I've always believed that as soon as the RE cycle looks to be topping out then that is the exact point in time Land Tax would be offered as a replacement. Sure enough, here it is, right on time.

    • The primary driver for RE price increases for the past 20+ years is interest rates. There are other factors as well but interest rates have facilitated ever increasing loan sizes.

      And that is why price increases have another 12 to 24 months to run and then the cycle will turn. I'm talking mainly about capital cities here but regional Oz will be affected as well. And I'm also predominantly referring to the bottom to mid-priced properties.

  • +2

    Just a small point of clarification. Notice you use the $500k 2 bed apartment of an Aussie battler as your example with 2.5% tax to demonstrate how bad it will be.

    But the proposal is to tax the unimproved LAND value, NOT the property value. The unimproved land component of a typical 2 bed unit will be bugger all because it is shared amongst all the units on the land.

    Then it is on the unimproved value of the land. That is the value without the cost of the building on top.

    Then the proposal is $500 + 0.3% of this small value.

    So really for apartments land tax would actually be very small.

    • -5

      Not sure you read all the comment or only point to the comment that suits you. But as i said before first home buyer don't pay any tax not even a cent so any tax that is introduced now is a new lifelong tax.

      Now let's work with 0.3% calculations for first home buyer under new scheme and then compare with current tax.

      so for property worth $500k the unimproved value will be around $400k means yearly tax of $500 + $1200 = $2540 now multiply by 40 to 50 year of living life of individual if they buy at 30 then it will be around $68,000 to $85,000 over the ownership of the property for maximum 50 years.

      Now under stamp duty in NSW the one time payable duty will be 0 for first home buyer so a massive TAX now applied to people who would have otherwise not paid anything in TAX. Even for those with who buy second property worth 500k only pays $17k in Stamp duty so with the new proposal they will pay 400%+ more tax then traditional stamp duty..

      Now work on different scenario and you will see general public end-up paying way more than what they are now.

      • And since you love quoting figures again use common figures, not SydBoy figures

        Across Australia, the average length of time we stay in each property we own is 7.5 years for houses and 6.5 years for apartments, according to independent data supplier, RP Data.

        The numbers differ suburb to suburb and Iā€™ll get into that in a minute as itā€™s fascinating stuff. But looking at it from a national point of view, weā€™re seeing the longest periods of tenure in desirable well-established suburbs close to the water and CBD in Melbourne and Sydney (9.6 years for houses, eight years apartments and 9.1 years for houses, 7.4 years for apartments respectively).

        https://switzer.com.au/the-experts/lesley-ann-grimoldby/how-ā€¦

        AND again, the propoasl you are criticising says you can pay Stampduty or choose the property tax.

        If you plan to stay 30 Years then sure choose Stampduty where as if you are the norm, Choose the tax.

        Also you pay Stampduty upfront which is fine if you have that, so there is interest costs etc that impact this decision. Ay low rates like now its minimal, but in 20-30 years might not be.

      • +1

        I don't think you understand what @meumax wrote.

        He's talking about apartments and it looks like you're talking about houses.

        Also the average length of ownership in Sydney is 7 or 8 years.

  • What about people who have already paid stamp duty. Will those properties be grandfathered?

    • +2

      No. Unless you are buying a property, and should this proposal be implemented, there would be no change. If you have already paid stamp duty on your existing property, you will not be subject to annual property tax. There is no double taxation.

      https://www.treasury.nsw.gov.au/budget-financial-management/ā€¦

      • -1

        Before election Liberal National Party said there won't be any new TAX but now they are introducing so how can you trust them or whatever they printed on fancy brochure !

        • Ah ha, you never answer the challenges, just change tack.

          So we know the basis of your whole argument is.

          Liberal - Bad
          Labor - Good.

          Thats all. If it portrays that then you go for it.

          ITS A PROPOSAL put to the people - us

          Lets discuss it, Fairly.

          So they havent introduced a new TAX, they are asking the electors if this makes sense to them.

          When you butt out with BS we get thoughts from people that make sense. Like the one @meumax made.

          How does it impact Units which have low UCV? Now thats important to have clarified.

          I read the "fancy" brochure and I cant find an answer to this either.

          • -1

            @RockyRaccoon: LNP has been mentioned throughout as they are the one who is introducing new TAX on working class Australian Mom and Dad and future generations.

            I know it is a proposal and that is when we need to provide firm response and reject it not after they introduce it. They could have taken this to election but instead they want community consultation as they don't want to loose election on this one after recent corruption related to property development came to everyone's attention.

            Why don't you read my comments where I explained very clearly on how it impact Units. Also read comment from 91rs below and TheMindsetTraveller in the forum.

            Also you know that First Home Buyers who wants to buy property (Unit or House) under $650k don't pay any tax at the moment while this proposal introduce TAX on those first home buyers.

            All those with limited finance knowledge or those in real-estate or mortgage or property developer and the government benefit from this scheme for sure.

        • +1

          It is evident throughout this thread that you do not care about the policy at all (baseless claims, misleading information, incorrect random figures) and are merely trying to pile on the LNP.

  • Shit Boss,

    it doesn't take sherlock to look at the clues to figure out when net migration is zero and you cant flip property to new migrants,
    Its time to think up of a new ponzi scheme that the gov can take full advantage of.

    Say next year covid holds up, we'll start to see what new taxes start cropping up.

    Man I smile everytime I hear this hard working middle class bull$hit you lazy pricks spout out your assh0le.

    Property prices don't go up with hard work di<kheads. It goes up as long as you have a steady stream of migrants coming into the country.

    When you get hooked on crack, a smart dealer will start upping the prices.

    • +1

      One Nation won't provide next prime minister so migrant will keep coming.

      Also increase in property price depends upon many factor but shthl who don't know finance won't understand that lower interest rate also pump-up prices… !

      • Didn't need one nation. Covid take good care of migration right now.

  • +1

    Much better to pay the land tax option if buying an unit or apartment as the land value is quite low. Lower payments than a lump sum payment of stamp duty.

    • Their gonna lay pipe into your anus any which way :) Discussing positions which might take the edge off the pain is what forums are for.

  • What happens when you buy and then sell next year?

  • -2

    Anything to curb property speculation has to be good. Even better if it is coming from the liberals especially considering the fact that NSW Premier is arguably one of the best the country ever produced.

  • +4

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

    This is the motto of the Liberal government. They seduce people into voting for them through tax cuts whilst doing absolutely idiotic things such as bending over to Murdoch and building a shithouse NBN (look at how that's served us this year), the sports rorts scandal and doing absolutely idiotic things at a state level such as paying 3x the money land is worth in NSW for light rail and the western Sydney airport deal.

    If only our economy wasn't so reliant on stupid stuff like building houses and importing bodies to put in those houses.

    • +1

      I thought western Sydney airport deal was 10x? I could be wrong though

      • corruption at its finest

      • The Commonwealth paid $30 million for the land, which was later valued at just $3 million.

  • +7

    Amazed no one is complaining about the huge sums of money that get paid to REA's for doing well nothing in most of Australia to sell houses, they sell themselves.
    If anything I'd pay SD on a place but not want to pay a REA (scum) the tens of thousands of dollars places can attract in commission.

    I'm against land tax or any ongoing taxes, it further feels like every single thing in life is now a subscription and you don't actually own anything at the end of the day, a subscription I'm about ready to cancel at this point in time.

    Yes SD is a chunk up front, no doubts about it. But once it's paid its paid. Stay in that property until you must leave it? I'm looking to try buy a first house but am looking at it from the point that I will be there decades, many others are the same and see their home as a place to live more than anything else (investment or get rich by buying and selling later deal), not everyone has this desire to buy a new house every 5-10 years, many boomers I know still live in the same house they purchased in their 20's, they just had theirs paid off in 10-15 years not 30).

    Maybe the focus should be on the current mismanagement of funds available for future use?, the government are also concerned that with things like COVID and other unforeseen situations that impact property sales (and bank lending) that they will lose that sweet deal they now have and want to latch on to people for more money every year, a number that once its been started can't be stopped as its up to whoever is in government to increase it as they feel their spending needs require. Let's be honest, it won't be going down.

    What about those of age who have to move or downsize?, now being stuck on a pension or low income who will be subjected (possibly unless there are exemptions) to this ongoing tax every year?
    I know I already have to fork out considerable amounts of money every year to look after a parent who's pension age, they don't own a property but if they did they would not be able to manage all the insurances, rates and then a land tax on top of that. Should this be a burden their offspring should have to carry? On top of stupid house prices?

    So if they did own something, would that then mean they would have to downgrade again after working all those years to pay the damn thing off to have much less than what they had so they can budget the lower cost of a new dwelling and to put enough cash aside to keep paying a greedy government their annual tax grab?
    You think other costs like health insurance and cost of living are going to get any cheaper? dreaming.
    Would you expect me to do the same thing? be forced to sell the only house I ever was able to purchase to downgrade to allow for future taxes to be paid at the end of life or at retirement age? That seems like an unpleasant way to spend your final non-working years.

    The real biggest setback to first home buyers is the outrageous price of Australian housing in most major cities (where the jobs are) and the fickle and selective risk averse banks who expect you to live with zero expenses and do nothing for them to be able to grant you a loan for what is the same or similar to what you have already been paying in rent for 10-20 years.

    Will these land taxes help foreign investment? will it be easier for them to bank land not needing all that up front cash and only paying X% per year on it?

    Anytime I see anyone who's in REA, finance, or accounting smiling and being excited about something they're announcing I know that we're all about to get bent over because of it.

    Australians needs to stop treating housing as a luxury item and their guaranteed path to making a fortune.
    Decade after decade of TV shows glamorizing people buying, slapping in a new kitchen and some paint then selling for as big profit as possible a competition has screwed over generations of Australians, how can no one see this is bad for the wider community?

    Housing should be accessible for everyone who lives here.

    • +2

      Too many people are after instant gratification. ā€œWhat, no stamp duty?! Gimme gimme gimme!ā€ without realizing theyā€™ll be paying for the rest of their lives. Exactly the same reason why Afterpay is so successful.

  • +4

    . 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.

    That's not how rents work. The market determines the rental prices, not the landlord. The landlord would already be charging the highest the market will accept.

    • +3

      And if all LL's want to shift as much of that cost off to renters? and it becomes the norm? then they would get away with as much as possible, maybe not all.
      $1k land tax would be $20 a week rental increase, not out of the realm of possibility, My rental increase at the start of 2020 was $20 a week.

  • +9

    The ONE advantage first-home buyers have to get their foot into the property market is not having to pay stamp duty (up to a certain amount), and they want to take that away? And increase price speculation and property investment (which should be banned) in order to make housing even more unaffordable? WTF?

  • +2

    It'll be good if:
    1. You can opt out of this tax/stupidity for life
    2. This doesn't apply to people who have already paid stamp duty on their property.
    3. New tax costs the same as the stamp duty but spread over the life of your property

    • Brilliant if this is true.
    • Bad if it costs more than stamp duty over the life of the property
    • If you sell before you pay off the whole stamp duty, you pay off the remainder in a lump sum.
    • +3

      Of course it will cost more than stamp duty in the long run. Introduction of land tax isnā€™t a tax cut

    • -2

      They have not defined what is life of property, also the calculation doesn't say that it will be (3.5% x Property Value)/Life of property where life of property is say 100 years.

      Now what they have is $500+0.3% of unimproved land value where 0.3% will change every year, obviously they won't say now how much it will go up and when it will happen because the way they are introducing new TAX to next generation of Australian same way they will keep hiding all the details and even change their mind afterwards.

      Liberals Always Believe in introducing TAX to working class Australian Mom and Dad while giving all freebies to business where business owner gets all benefits. There is no tax on commercial property in this proposal that means all rich people who invest in commercial property pays nothing but poor people with limited income has to pay tax every year and has to pay more than what a stamp duty might cost them now.

      • Oh well, could be worse.

  • +2

    Even though one-off is better than annual payment, the one-off is an in-effective tax and it is a barrier to buy & sell property.
    Annual payment is a good step overall.

  • +6

    Whilst I appreciate OP's passionate defense of stamp duty, it is clear that many think-tanks and economists strongly agree that a land tax is more efficient and better overall.

    From memory, Grattan institute (among others) had a paper on this.

    It may look worse on certain circumstances (like many other things), I believe that this is a good step (on balance).

    From what I have read in the past, this thinking is beyond party lines, but implementing such a huge change on a big income stream requires more thinking. As such, it is generally agreed to be a good step to move away from stamp duty by most.

    I hope that there are real economists or modellers who can chime in with their thoughts. This way, we can take the emotions out of these sort of debates.

    • +3

      There are dozens of papers from the last 3 decades in support of this move, from both private industry and government agencies. Good on the NSW LNP for finally having the guts to implement it!

      • Yes, there are dozens of paper published by Grattan Institute that says clearly that Land Tax is beneficial to the Government in collecting tax as it provide steady stream of income which basically means it creates steady stream of expense to working class Australian Mom and Dad, the same working class Australian Mom and Dad the Prime Minister Scott Morrison referred when he rejected Labor's move of removing negative gearing and claimed that it is a Tax but now he didn't say a single thing when Liberal National Government Introducing lifelong TAX on Australian in NSW.

    • There was never a disagreement that this TAX is good for the Government, it is all about new TAX on people who will suffer more out of this TAX then anyone else.

      The Major beneficiary are Liberal National Party's corrupt politician who makes back door deals with developer.

      • There would always be opposing views on everything. However, having read the articles and all of the pros and cons, the general consensus is that this is a good move for the everyone.

        I can truly appreciate your passionate defense of stamp duty as everyone can have their own views on taxation, government income stream or what the government does or not.

        At the end of the day, a democratically elected government is in power to "hopefully" decide the best way forward for the community (whether it is tax or spending).

        The idea of a land tax has been around for a while and most economists support this idea (regardless of political affiliations).

        The original post seems to suggest that land tax is an American idea, which I think is misleading. However, the idea of "what is good for the government is bad for the people" is very much American.

  • +4

    My parents have lived in the same house for 40 years. As far as the government is concerned, they are deadbeats. Government would love for them to move every 7 years. Instead the government received one load of stamp duty instead of six.

    I don't know why people are so keen to pay more tax instead of less. Yes, a large lump sum of stamp duty up front is difficult for young home owners to pay, but that's very short term thinking. It's like the person who pays car registration every three months instead of twelve because it costs less money. In the short term, yes. But in the long term the person is far worse off.

    Will an annual land tax make rent cheaper? Quite the opposite. The yearly cost will not be paid by the property owner. The renter pays.

    • It's like the person who pays car registration every three months instead of twelve because it costs less money.

      Paying rego in instalments is 1, better for cashflow 2, less interest if paying with credit 3, the rest of the funds can be used to invest in passive or active gains before paying the next instalment.

      Renters have more choice.

      https://www.afr.com/property/residential/inner-city-vacancieā€¦
      Inner-city areas of Sydney, Melbourne, Brisbane, and Adelaide show significant rises in rental vacancy rates compared with 12 months ago, with the City of Melbourne alone having more than 7000 vacant properties, according to the data.

      • -1

        Well Rego is not a good example, you know it but you didn't try to explain that either. not sure why as you seems smart i guess.

        Rego when paid in installment or lumpsum is the same cost and hence installment is good but not comparable to land tax. However land tax is not calculated by dividing upfront stamp duty by 100 year, so it is bad.

        Land Tax will increase every year on year and every new government will manipulate to their benefit and only working class Australian Mom and Dad will suffer and so is first home buyers and younger generation.

      • Report you are referring for renter was published in Oct 2020, so during the COVID and yes there are more choices and it will remain as long as international boarder remains closed and COVID continue to survive.

        Do you believe COVID remains and boarder will remain closed? if not then renter choices will change and rent will increase and it will increase more after land tax.

    • The yearly cost will not be paid by the property owner. The renter pays.

      This is so wrong. The renter pays the market price of the rental, irrespective of what the property owners do.

    • I don't know why people are so keen to pay more tax instead of less

      Because for some people it is not in their best interest to live in the same place for decades. Without stamp duty, they may pay less tax.

  • +3

    It's all about the money. They only care about increasing their cash income. If you think they care about middle class you are dreaming. Stamp duty is too expensive to begin with and now yearly tax. No

  • +3

    This proposal isn't about removing stamp duty at all. It's a bait and switch to a) suddenly fuel an increase in property prices (because vendors figure you now have an extra $50k to spend), b) lock the populous into higher land taxes forever.

    It's a bad, bad deal for the public. A worse deal for first home buyers. Investors will love it, flipping houses with little financial consequence while binding future owners to increased land tax.

    Nothing will be cheaper. You won't save the stamp duty. You'll pay for it twice, once in increased home value, then again in monthly tax.

    Stamp duty isn't pleasant, but don't let the replacement of it fool you into thinking things will be better for it.

  • I think stamp duty is a deterrence keeping people away from property transaction. Having this changed to a land tax to be paid on new transaction will see people rationalise their real estate needs.

    • +1

      Will it be their needs or their wants? The McMansion is still a thing around Australia, look at other posts with old mate and his 5 cars who cries for more parking.
      It'd be fueling wants far more than needs, you NEED shelter, you don't NEED parking for 5 cars off the street.
      Its to continue to prop up housing prices trying to fuel more demand in the limited pool we have and also generate more tax at the same time.

      • -1

        ā€˜Needā€™ can be fulfilled by keep renting. Of course a person has all rights to do a property transaction if they ā€˜wantā€™ to upgrade/downgrade as per their requirements AND not having to pay the astronomical stamp duty. I think this debate is turning into property buyers vs renters debate.

        • +1

          True, however there is much less stability in renting, especially as people get older.
          When the LL wants to sell up and make their profit you're out. I've rented for far too long, I've got stuff in boxes i've kept that i've not opened in a decade knowing that it will just have to be packed back up.
          QOL for renters is lower.

    • +1

      it also mean more investor including foreign buyers will buy more Australian property , keep pushing property prices high and keep first home buyers and Australian out of property reach.

      it also means renter pays more rent to cover new tax…

      it also means more commission to real-estate agent, mortgage broker, wealthy property investor, people who flip property make fortune out of property, more revenue to government and more tax and expenses to working class Australian Mom and Dad.

      Also good for Liberal mates who do property deals with developers !!

      • That will happen regardless. Iā€™m not a fan of Steve Keenā€™s doomsdayer theory, and believe property prices can only go in one direction in the long run. This has happened across the world in 30-40 year timeframe. Housing costs are high in Australia and thatā€™s a reality people need to come to terms with.

  • +1

    With regards to investor snapping up properties and increasing market prices, well, introduce guard measures such as extra levy if you own more than x properties, such as the Medicare levy that if one earns more then pay more.

    Or even an extra one off tax when you buy if you already own x or more properties.

    • -1

      Introducing restriction on investor does not address the biggest concern everyone has that the people will pay 300% to 400% more than what they would pay with stamp duty. Examples are provided above.

      • The government needs revenue streams to provide services to the public. Ideas to not let it become 300 to 400% would be eg let's introduce a cap, to maybe 150-200%. Easing the amount to a long term hopefully will make it more affordable for all. Yes it depends on how much. E.g. if they can cap it at $500 per year, and let that pay off in whatever years it need, so $26000 will be 52 years, or $39000 will be 78 years. It'll lower barrier for more people to own own properties instead of to selected fewer people. I suspect the current proposed plans probably isn't exactly like what I mentioned. But if it can be turned into more mortgage like repayment of the stamp duty into a tax and capping how much repayment is needed per year, then more people can own their home. It is why we have mortgage at the first place, because it helps easing payments as they become more tolerable.

        The more urgent issue seems to be most of the current and future generations (younger than 40? A rough guess?) cannot own their home due to barriers such as high stamp duty.

        • +1

          The government needs to manage a budget in a responsible way like the rest of us out here do every damn day, week, month and year.
          If we personally screw that up, our bills go unpaid or we don't eat (or eat very poorly).
          We shouldn't be treated like our pockets can just be emptied a little more each time they overspend, each time they abuse their powers, each time they feel like a pay rise.

          If I saw planning, like actual real planning with actions that could be achieved without the blow-outs that end projects half done at 2X or 3X the cost I'd be more interested.

          If I saw accountability for the waste of tax dollars I'd be more interested in this, look at places like Sweden, Denmark, Norway and how they know that taxes must be put to good use, look at how they tax natural resources that only can be dug up, drilled and sold once are treated.
          Australia does not do this.
          Australia's government(s) do/does not have its citizens best wellbeing front and centre.

          High stamp duty is not preventing me (someone who owns nothing) from buying a house, it's the insane prices of housing in Australia.
          It's the fact at this point in life I couldn't see myself living in a 1br apartment for the next 10-20 years without going mad, its banks who especially during covid have been so risk averse and so difficult to deal with for lending that over the course of a month I had several less lending options due to banks restricting who and how much they'd lend to, banks who pulled products from under me while I was trying to buy a house leaving me without finance or pre-approvals in place.
          The same banks who employ ex-politicians who make bad decisions for the rest of the country while in their former job.

          I don't think these people who say "stamp duty is the issue for first home buyers" know what they're talking about really, the landscape has very much changed, I had friends laugh at me and ask why I couldn't get a 100 or 105% mortgage to buy a place (like the several they own), her husband had to correct her saying yeah that's not a thing unless you've already got property and equity.
          The disconnection from reality for people with these ideas is amazing.

        • "most of the current and future generations (younger than 40? A rough guess?) cannot own their home due to barriers such as high stamp duty." - this is wrong. Stamp duty is not the barrier, inflated housing price and increase requirement by banks to have minimum 20% deposit is the barrier.

          for house/unit under $650k there is ZERO stamp duty so it is not the barrier at all.

          Land Tax will make loan serviceability worst for first home owner and younger generation as there will be ongoing tax on their income.

          • @SydBoy: Fair point.

            • @zrmx:

              Fair point

              Not really because SydBoy conveniently ignores that the proposal is offering first home buyers a grant of $25K which they can use either to pay stamp duty (or part of it - ie the first $25K if they buy a property), or pay down other expenses if they elect to pay yearly tax.

              Again it will depend on how long they expect to live in the house before moving on. If its long, then they will be better off paying stamp duty rather than the property tax.

              • @RockyRaccoon: well you are ignoring history where giving grant increased prices during the GFC. As I said before free money provided by any government linked to housing in Australia increase housing prices so first home buyer not only goes in to ongoing lifelong tax but also pays more for their home due inflated prices as a result of grant plus investor jumping into the market to take advantage of land tax instead of paying lumpsum stamp duty.

    • Or even an extra one off tax when you buy if you already own x or more properties.

      Thats what stamp duty essentially was, a tax for when you own 1 property or more (or for people rich enough to buy very expensive homes for the first time).

  • +1

    Wouldn't it be easier to buy and sell homes (moving) if we pay yearly land tax?

    If we buy and sell often, we lose money on stamp duties, right?

    • you are right from the investment purpose this land tax is significantly helps real-estate agents, mortgage brokers, wealthy property investor, investor into property flipping business and of course the liberal government who wants to introduce new lifelong tax on working class Australian.

  • I am all for it.

    Here's my scenario: bought a property with mum 6-7yrs ago due to her age and being unable to get a loan herself. Eventually bought my own apartment - not as big but in a more convenient location to shops and public transport. Being retired, older and not driving, that suits her much better.
    She prefers my place and I 'hers', however we cannot do any sort of legal swap without paying SD again. If we just decide to live in each others places and notify centerlink etc, she loses pension benefits as she is not living in her PPOR and so it's considered an asset even though she won't be making any rent from it.

    I would rather be paying a reasonable tax and keep options open.

  • +4

    Stamp duty is a tax on moving. It's a tax on moving jobs between cities. It's a tax on upgrading.

    The new system is much fairer on the population. It's also better for the government as it's less dependant on the economic cycle.

    Now please, ignoring the political fantasy (if the Libs really wanted to do down the poor, would they ever get into power?) of the OP, what is wrong with this?

    • Stamp duty is a Tax for Property Investor who simply can't move from one property to another but …. definitely… Land TAX will allow more wealthy investor and foreign buyers in the market fueling the market for sure…..as they can move one property to another quickly and even buy more property….!

      • Most people on this thread do not agree with you and it seems same with publications. For a 'wealthy' investor, the cash flow would be affected by the new tax. And as you say they are 'wealthy', unlike most of us, so the initial stamp duty outlay would not matter.

        The bigger issue is how do you make the change - what happens to people on the old system who have already paid SD? Double tax? No tax?

        What would it do to house prices?
        As ever in Australia, this is the big question. Those in favour of maintaining the status quo think that it would increase prices because would-be buyers would be able to use the money they save in stamp duty to throw at sellers, thus bidding up prices. But advocates say that in the short term there wouldnā€™t be much change because any increase in spending power would be offset by the impact of recurrent property taxes.

        However, in the long term the average price of houses would fall, especially for larger family homes, because it would make the market more efficient ā€“ for example by incentivising retirees to downsize and thereby increasing the supply of family homes. ā€œIn the long run, a better allocation of the housing stock would lead to lower prices, particularly for larger dwellings,ā€ Coates wrote. ā€œOverall, the average price of housing would fall a little.ā€

  • I live in VIC and haven't owned a property before. I always thought we are supposed to pay early fees/tax already apart from the initial stamp duty when buying. Is my understanding wrong?

  • -2

    Can I just also say the OP's rant about Murdoch is just ridiculous. But ok.

  • +2

    Whilst I think property prices are far too high in Australia, and need to be dramatically reduced… I donā€™t think the issue is ā€œbarrier to entry.ā€

    We keep tearing down barriers to entry: stamp duty, first home buyers grants, super saver schemes etc. But these all have the effect of stimulating demand and inflating prices more.

    And once people have passed that barrier, they have a mortgage theyā€™ll be with for life. The barrier wasnā€™t the issue. The property value is the issue.

    Donā€™t get me wrong; I donā€™t think thatā€™s coincidental. Itā€™s very much by design, from successive governments absolutely obsessed with lining the pockets of property developers.

    What we need to be doing is disincentivising property as an investment. We need to make it harder for investors to buy, tax them heavily, and suppress the value of housing so that the return on investment is generated by land USE, not land value.

    That is to say, primary income comes from renting it out or monetising it, not from letting it inflate 10% year on year and just letting the coin roll in.

    Developing property should become more like a service industry to landowners, but what itā€™s actually become is more of a buy-and-sell marketplace.

    • Agree with what you said "What we need to be doing is disincentivising property as an investment. " and this proposal actually makes easy for people to invest including foreign buyers as they don't need to pay upfront stamp duty.

  • Just throwing it out there, but wasn't GST introduced to get rid of stamp duty? I can almost predict this is just a name change before GST increases in the long term.

    • Was meant to, unsure if it was meant to replace SD on housing though.
      That said if you buy land you pay SD (unless you're exempt as a first home buyer depending on the state) however you're still paying GST on the construction and build of the house so its half way there.

  • +3

    The reason I think this proposed change is bad is that it is very clearly made for the benefit of the most wealthy investment owners. There is a couple reasons for this;

    1. The property tax will replace both Land tax and Stamp Duty, meaning they will essentially just have to pay a tax they already have.

    2. The property tax is based on unimproved Land value whereas the Land tax was on taxable value which means the rate will be on a lower value meaning lower rate.

    3. No stamp duty makes negative gearing even better as instead of having the stamp duty adding to the cost base of the house you just offset property tax against your income, meaning bigger tax breaks with larger profits when you sell.

    4. following on In NSW the proposed property tax for an investment property is $1,500 + 1% of unimproved land value. The land tax for 2020 is $100 + 1.6% of the taxable value less the general threshold which is 734,000 and 2% if you are over the Premium threshold $4,488,000, meaning only the wealthier investors paid land tax. This new system will mean the more investment properties you own the less tax you pay, a little example from the budget itself.

    "In 2020, around $4.7 billion of revenue will
    be generated from about 180,000 land tax
    payers, giving an average annual land tax
    bill of about $26,000 per tax payer. "

    now to get taxed that much would mean an individuals total land value was
    $26,000/0.016 + $734,000 = $2,359,000 taxable value.

    I have no way of knowing the unimproved property value but lets just use the same number which would be higher and apply that to the probably highest land tax payers in NSW.

    $2,359,000 * 0.01 + $1,500 = $25,090 with the taxable value they will be paying $910 less or as a group
    $910 x 180,000 = $163,800,000 less a year

    Now for the sake of interest imagine they bought the houses with no stamp duty, I am going to treat it as if its one house because I have no idea how many properties it actually is so this amount will likely bea little inflated above the actual number, so at the rate of $40,490 plus 5.5% (as it is between $1,000,000 and $3,000,000) stamp duty would be;

    $1,359,000 * 0.055 + $40,490 = $115,235 each or $20,742,300,000 for all 180.000 of them.

    So in just one year of this new tax people who can afford to buy a $2 million dollar investment property would save at least $116,145 or for all these people $20,906,100,000 plus this amount will only increase for them each year, while for someone who is just buying their forever home the amount will be higher and higher as time passes, plus if their property value increases the amount they pay will too. so even if you save on stamp duty and invest it, your investment will have to at bare minimum increase by more than the property market or else you will lose out.

    • Typically and I believe this reform proposes this is that residential owner occupied and primary production properties would pay lower rates than investment properties, which in turn would pay lower rates than commercial properties.

      Also land tax is also calculated on the unimproved land value, its not calculated in the the value of the land and house.

      • There is no tax proposed for commercial property under the proposal. They just want to punish and take more TAX out of owner occupier first home buyers and everyone else.

        Commercial properties are owned by investor's so basically investors and REIT won't pay TAX but working class people will pay the TAX.

    • UCV is unimproved value of the property - that is the land value, which will be much lower than the improved (with house value by which stamp duty will be calculated).

      Again the major impact will be the length of time you plan to keep the property for

      • +2

        In Sydney Unimproved Land Value is around 80% of market value anyways so it won't be far from market value.

      • +2

        I was referring to taxable value as in the value on the opposite side of a land tax statement which is used in the calculation of land tax, The taxable value is the the UCV or 150% of the UCV from the prior year whichever is lower. I will admit I made a mistake saying it would be higher.

        time would be a factor, there is no method under the new method that would cost less than buying one place and living there, even later buying a second place there is no way to be better off. Of course if you were planning to move house every 5 -10 years it would great.

        A big issue with this is due to the fact it is not just percentage based for OO it is 0.3%+500 it means buying cheap places is worse, the higher the value of the property you can afford the better that rate becomes.
        If you buy a little place with land value of $150,000 the $500 accounts for about 55.6% of the annual cost. If you buy a place with land value of $1,000,000 the $500 accounts for 14.3% of the annual cost.

        Under the assumption Land accounts for 60% of the total price and assuming the value of the land never changes it would take 9 years to start losing out on the lower value house and 22 years to lose out on the higher value house.

        In all circumstances this system is made to benefit the wealthiest people, Stamp duty was at least progressive this is some feudalism shit.

        • Agree "Stamp duty was at least progressive this is some feudalism shit."

  • +2

    "appetite for property increases whilst supply remains stable which only means prices go up."

    Incorrect. Prices will go down.
    This move will lower yields on investment property, and acts as a disincentive to leaving land or buildings empty.

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

    No. It is a good move for the working class. The more taxes that are raised from the wealthy, the less taxes are required from the rest of the population.

    "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"

    Incorrect. Rent is based on market forces, the price of rent has not kept up with 20 years of increases in property prices. There is zero evidence that landlords will be able to pass on a new tax to tenants.

    Lower taxes does not automatically equal good. Don't work against your interests.

    • Canberra property prices didn't go down after introduction of the land TAX, which is an evidence that Prices will not go down in Sydney and it will keep going up.

      First Home Buyers don't pay lifelong TAX currently under Stamp Duty but under this scheme they will pay TAX and those first home buyers are battlers (as stated by Labor and Liberal Government), so your statement that wealth pay TAX is not correct.

      Also there is no TAX on commercial property which again is owned by Wealth including REIT and those wealthy people won't pay TAX that government want from working class Australian Mom and Dad.

      There is zero evidence that Landlord can't pass their TAX to renters. If they won't then they will pass it on to TAX payer as this is deductable expense so basically TAX payers and majority of TAX in this country are Working Class Australian Mom and Dad.

      The post didn't say that we need to lower stamp duty, we only don't need more TAX on top of what working class mom and dad pays.

      • +2

        Seriously have a read https://www.treasury.nsw.gov.au/budget-financial-management/ā€¦

        You keep sprouting about the working class mom and dad, this tax is targeted at the rich and commercial sector. Investment properties will pay 3X more tax then home owners, commercial property will pay almost 6.5 X the tax as home owners. Rich people also tend to own houses in the more affluent areas hence they will ay more tax.

        And have a read of this seems both Labour and Liberal are open to the idea
        https://www.afr.com/policy/economy/perrottet-s-new-land-tax-ā€¦

        I'm not a fan of a land tax but read the facts.

      • +1

        You keep talking about the working class, but the only people who should be worried about this tax are those who own $2M + homes, which I should highlight for you, make them millionaires just for the sheer luck of buying in the right suburb a couple of decades ago. Suddenly they may consider downsizing.

        It does not benefit the working class to pay less taxes, the working class are eligible for the payments those taxes fund, the wealthy are not.

        Taxes have to come from somewhere, you seem to have the mindset that if we oppose all taxes everyone wins, or that all taxes are wasted. These are talking points that only benefit those far wealthier than you.

        Noone can guarantee property prices will not keep rising, the fundamentals are very strong in many cities in Australia, however a yearly tax is a negative pressure on house prices which targets the wealthy and investors.

        Stop. Arguing. Against. Your. Interests.

        • Well hopefully they dont have high enough disposible income to fund the land tax and then have to sell… and hopefully enough ppl sell to push that 2mil property down to 1.9mil for the rest of us to buy easily… and hopefully we have slightly less high enough income to pay land tax instead of that lucky bugger who profitted off rising property prices

  • +1

    this is bullsh!t i rather pay one off payment than ongoing like long payments, making it even harder for first time buyer s now cuz investors and flippers will benefit the most here/ and that will drive the house prices up further, as if they are not high already

    • Funny that our SydBoy gets upset when I point out the BS in much of his argument, where what you say is a risk of this.

      I guess we dont really know.

      Based on that if a flipper has to pay the stamp duty, to be able to make a profit, they now need to cover that expense (and agents commissions) so stamp duty paid up front would be loaded into the flipped selling price.

      Alternatively given that many people will buy a second house sometime (on average at least every 10 years), so will have to pay stamp duty again.

      People move for various reasons.

      Family - have more kids
      (De)Family - Known as, Divorce so property has to be sold.
      Job change so travel becomes greater
      Economically they are better off later as they are now saving by not paying rent, so they move up market
      Older people hold on to property too big, that could be available to younger familes because cost of moving - Agent fees and Stamp Duty on sale and repurchase are high. They dont qualify for first home buyers grants etc
      My parents moved 7 times so far in their lifetime, and dont want to move again because stamp duty on their replacement home, if they do will be very high

      Again I dont know, and thoughts on these would be valuable

      • Your statement is spot on "so stamp duty paid up front would be loaded into the flipped selling price." and that is the reason why there isn't much of flipping market in Sydney as no one would buy with such heavy price tag within 3 to 6 month of selling.

        but with this lifelong TAX, flipper don't need to allow for big "stamp duty" in their selling price which allows more flipper to be in the market…

        This Netflix or Saas or Subscription based TAX is not good for people as they will have additional TAX to pay every year they own property.

        Microsoft use to sell Office for one off fees but now it is subscription based that means people pay every single year so those who still use word same way they used for many years now need to pay every year…and there is no brainer that it is making money for Microsoft and not for the users. Same this life long TAX is good for real-estate agents, mortgage brokers, wealthy property investor, property flippers, government but not for real hard working class Australian Mom and Dad or First home buyers or future generation.

        • People flipping houses actually increases housing stock and likely boosts the construction sector as it removes the obstacle to upgrading.

          Taxing all property means people who have multiple houses sitting empty are likely to not want to pay tax and will either put it up for rent or sell in. Both increase the stock on market.

  • +3

    Certainty is always better than uncertainty. So once off upfront cost is better.

  • so how does it work for those who have recently paid stamp duty. Now they have to pay annual land tax too? isnt this double counting.

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