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

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

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

    • Now they have to pay annual land tax too?

      Its the mising (probably deliberate) information by the OP in their presentation of this proposal.

      1. Its a proposal
      2. Its proposed that you can either pay annually or upfront as is the case now.
      3. If you have paid Stamp Duty - ie you have a home now, then its been paid upfront so no more will be charged.

      And in very simple terms, you do the math based on how long you plan to own the property.

      If its short - like 3-4 years its a no brainer pay the yearly tax.
      If its long - like 20-30 years, pay up front.

      Years in between will depend on the actual rates being charged when the options are offered, which at the earliest would be after March 2021 (and probably not through implementation until later in the year)

      • +1

        regarding having a choice, that is only for first and second generation houses for this proposal. What that means is if the property has never had property tax on it you get to make the choice, however if the previous owner bought it with property tax, every owner after that will have to pay property tax. You know for certain investors and house flippers will be snagging all the houses with the property tax method very quickly.

        1st gen refers to houses in the current market
        2nd gen houses in the property tax market that have only been bought with stamp duty
        3rd gen property tax houses

        If it was 100% optional I would be all for it, only issue would be government would lose out on a bunch of tax revenue as all the investment owners would use this method and tax deduct it. and the only other people that would use it is people who only plan to live there 3-4 years.

        • +1

          I agree and thats something which will impact the resale value of the house, especially for someone who is buying and expects to stay there for a long time. Whereas someone who expects to stay only a short time wouldnt care.

          How long is a "short time" that will depend on the tax rate finally proposed.

          • @RockyRaccoon: Personally I would like to see it be a flat percentage amount if they had to implement it.

            I also think it could work very well as a progressive tax system tax system as well much like stamp duty, as realistically people who are going to buy expensive houses are not going to change their minds over this. I am referring to all facets of the tax, except for maybe the farms, primary producers need more slack IMO.

            and the piece de resistance of my opinions, make it a non deductible payment, that adds to the cost base of the house. If it is replacing stamp duty I want it treated like stamp duty, also makes for an interesting tax planning tool for capital gains, which is always fun.

    • -1

      Those who already paid doesn't need to pay again but that situation can change the way they are now introducing. Also things might change if you put granny flat on your property.

      The option to pay stamp duty or lifelong tax but again the option will disappear once they phase out the stamp duty.

      Also this is proposal and not passed yet but the post is to collectively reject any new TAX on the proposal that ruins life of working class Australian mom and dad.

      the proposal propose no TAX on commercial property so wealthy pays no TAX but working class Australian Pays TAX.

      • the proposal propose no TAX on commercial property so wealthy pays no TAX but working class Australian Pays TAX.

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

        Annually
        Commercial property
        $0 + 2.6% of unimproved land value

        How does that equate to no tax?

        Residential
        $500 + 0.3% of unimproved land value

        Much lower

        • -1

          Agree on oversight on my side on commercial property but that still doesn't change the fact that the first home buyers pays no TAX….. !

          The same link also says:

          Owner-occupied residential property

          Currently liable to stamp duty? Yes

          Currently liable to land tax? NO

          Potential property tax rate - $500 + 0.3% of unimproved land value

          So basically it will introduce new TAX for life of the property owned by person.

          $500+0.3% in massive in Sydney and unimproved value is 80% of property value anyways.

          • @SydBoy: Again., you spend ages arguing points that are debunked by the Q&A on the site by Treasury.

            Should this reform be implemented, existing stamp duty concessions for first home buyers could be replaced with a grant of up to $25,000. Like all other buyers, first home buyers could then choose between an upfront stamp duty or an annual property tax.

            Obviously this no tax on 1st home buyers (under 650,000 as currently now) is likely to continue.

            Although this isnt yet finalised.

            If they dont provide this I doubt whether it will succeed. And that battle can easily be fought at that time.

            It will probably be determined also by the continuation of that concession. That is if it is being provided if this gets up.

            Also the 650K threshold is based on the selling price. ULV on my home/land has jumped in the past by 50% but is only 60% of the market price not the 80% you claim. Obviously the closer to the inner city where land is scarcer the percentage is probably higher.

            The further way from the city centre the ratio changes. Given also that most younger first home buyers are buying further out buying based on ULV would have a longer period of being the beneficial way to purchase.

            However as Bjingo points out this can have an impact when you sell.

            From the Treasury faqs

            Once a property has been opted-in, the property would remain subject to the property tax for all subsequent future buyers of that property. Over time, more and more properties would become subject to the property tax, which is important for realising the full economic benefits of reform and for achieving fiscal sustainability. But even after twenty years the option to pay stamp duty would remain for more than half of all properties.

            So why not discuss the actual proposal and the issues itself raises rather than the BS about LNP and working class people.

            While that maybe true or percieved to be true about their biases, it just muddies the true discussions about this proposal, which we all need to carefuly consider.

            • @RockyRaccoon: No where on the document that you provided it says that there will be no tax for first home buyers. The grant money push up prices and it has been demonstrated in past whenever any government provided free money.

              When Labor provided money to fuel economy it is the same treasurer that you referred here opposed as waste of money but now it is economy boosting !! It is the same Scott Morrison who opposed labor when they spend money during financial crisis now supporting their spend and this was also covered on ABC.

              Second, as pointed out by many commenter above this is lifelong TAX and is going to cost more than one off stamp duty. There is no evidence provided by treasury which says that we will not TAX you more than stamp duty because he knows that he is intending to TAX more.

              "even after twenty years the option to pay stamp duty would remain for more than half of all properties" shows that many people live in same property longer and under the tax all they will pay more as demonstrated in above comments so basically you agree that there will be more people who suffer due to this then those who might benefit (mostly wealthy investor and real-estate agents and of course treasury friends doing dodgy deal with developers)

              The TAX doesn't exempt owner occupier and that is where government wants to keep collecting money from hard working people every year they live in any house they own (small or big doesn't matter). As progressively TAX rate will increase like everything in life the people who are young today will pay big time when they retire.

              Government Spend Money and did modelling and they didn't work out whether this TAX will cost more or less over the life of property? is a Joke. Every claim suggest that Government revenue will improve and yes that improvement will come at a cost of working class people paying more TAX then what they would have under the Stamp Duty over the life of project.

              Yes, it is proposal and for all above reason including lifelong subscription based TAX on Working Class Australian Should be Rejected at this level before it goes ahead.

              Yes, it will provide "economic benefits" to Government so they can buy more lands from mates where the land was worth $3m and they paid $30m. Where contaminated land was bought by current treasurer/government with whooping cost of $53.5m when the same contaminated land was bought by developer 7 month ago for $38m so the same treasury if you have read the reports paid $15.5m more… !! Where was the financial sense and economic sense ? …Now this type of TAX in future allow them to spend (waste) more public money collected from Hard Working Australian Mom and Dad for rest of their life.

              You agree that this TAX will be paid for rest of the life by the owner and it will cost more than stamp duty over the life of ownership of the property and there is no disagreement by anyone who supported Land Tax on every day Australian.

              In Democracy you can support what you like if that provides you monetary or non-monetary incentive in term of real-estate agent commission, mortgage brokerage, fliper's profit but that doesn't mean you try to prove what is wrong right !!

              • @SydBoy: Open you eyes I already gave you the quote from the treasury about replacing the exemption with a grant.

                You think that exempting properties for 1st home buyers buying under 650K doesnt impact house prices whereas a $25K grant does (both worth 25K). Are your serious - same effect of both.

                Your beloved Labor party is seriously considering the idea, and will support discussions on this.

                And to be commended for considering and investigating what and how this can be done. They have committed to looking at all the issues and seeing how to best address these. In the end they like all political parties also have to look at how this could reduce revenue, which reduces what they can spend elsewhere.

                One factor could be is to reduce the costs of administration, that can offset the loss in revenue. But without looking at this how will we ever know.

                The difference between us is that I want to discuss the proposal, merits and warts. I accept like all proposals there can be winners and losers. We need to understand those. Also its a very long term plan and probably wont be implemented until next election in 2 years time.

                Also you have this habit of twisting and misrepresenting things. You quote a rort or 2 which can exist even without this proposal. Like the sale of coal leases in Newcastle done by corrupt members of the opposition. "Working Class" families etc etc.

                A minister caught speeding doesnt mean we throw out speeding fine reform. So lets move on

                You confuse a tax on the property with a tax on the individual. Stamp duty can cost a property more over time, IF that property is sold and resold more frequently. Sold after 5 years, then again 4 years later etc etc. Given average house move is every 7 years it COULD be more. These could be "Working Class" families saving as well.

                If you are older and more settled then say at 50 your kids have left home, you sell and move into smaller home, live ther for 20, 30 40 years. Then stampduty is by far cheaper.

                In that case I totally agree StampDuty is cheaper and I would take that on when my circumstances where that.

                However say you are 80 and want to move into a retirement village, where you buy a unit, land tax would save you money unless you lived to a 100.

                That is my position .

                Its NOT what you say, that I agree it will cost more for anyone who supports this legislation. I said it will affect SOME. Issue is how big that sum is on some.

  • +1

    Excellent post OP. Now I will read the comments.

  • +3

    Ah, another scheme to further artificially inflate and maintain high house prices. I wonder why a Liberal government would be wanting that, hmmmmm.

  • Not sure how you figure that. This is a catch all tax, everyone pays and investors pay more. This tax makes investment property less lucrative. Someone buying an investment property at with land value around 500K will be paying 6.5K every year increasing as the land value goes up. Sure its tax deductible but you actually have to pay it and that equates to $125 a week out of the rent collected.

    • -1

      your statement - This tax makes investment property less lucrative. is not true because in that case Stamp duty is also bad for investors and going by your logic property prices would never had risen up to what they are now in Sydney.

      Currently under the proposal land tax on unimproved land value of $500,000 is $2000 and that $2k equates to $38 per week and that can easily added into rent so rents will go up.

      Now note a point that investor currently can not take credit of stamp duty ongoing basis the only time they count it as expense when they sell but under the current proposal market will be more favorable to investor as first they don't need massive sum of stamp duty to start with and second from the year they buy they can add it into their tax return as an expense and also increase rent to cover the cost.

      All in all this favors wealthy investor, real-estate agent, mortgage broker, the government (who waste our money and make side deal with land developers) but terrible for people who want to live in house a hard working Australian mom and dad who currently don't pay any tax if they purchase under $650k and only pay one off if they go above $650k. so this is subscription based tax designed to keep poor more poor and rich more rich similar to a philosophy liberals believed since federation.

      In all above i have yet not added foreign buyers who will also benefit and will buy more !!

      • Your number is wrong, so please research carefully before making statements like this.

        The proposed land tax rate for investment residential property is $1500 + 1% of unimproved land value.

        For an unimproved land value of $500,000, the extra tax the landlord has to pay is $6500, which equates to $125 a week. That is a huge increase, you can't just simply add it to the rent.

        And if you look at it more realistically, an average house (i.e. more than 40 years old, and smaller than 300m2) in Sydney inner west typically has unimproved land value of $1,000,000. The landlords of these property will have to pay $11,500 a year in tax, which makes investment property a lot less lucrative compared to the stock market.

        Please see how much more affordable property in the US compared to Australia, even in big cities like New York. One big reason is their huge land tax.

  • "but your wage increase will always be lower than CPI"
    Funny, the complete opposite of this is true. We've never been wealthier.
    In Australia during the 40 years from 1976 to 2016;
    • Inflation has increased ~500%;
    • The median full-time salary has grown ~850%;
    That's a 70% increase in wages relative to the cost of living.

    • +2

      This is why I always fact check statements.

      Inflation did increase by ~500%

      However I noticed an issue right away with the 850%, firstly Inflation effects everyone, not just full time workers and you only used the full time wage. So I looked into the figures and saw what 850% is based on

      "average weekly earnings, excluding overtime, of
      full-time adult male non-managerial wage and salary
      earners were $177.50 "

      https://www.ausstats.abs.gov.au/ausstats/free.nsf/0/B245ABB5FC28CEF1CA25750C00189F5B/$File/63020_DEC1976.pdf

      and

      "Full-time adult average weekly ordinary time earnings
      1 533.40"

      https://www.abs.gov.au/AUSSTATS/[email protected]/allprimarymainfeatu...

      Which is terribly skewed because that first number does not even include all full time workers, only the lower paid ones. When you take the average of all workers for both periods being 193.50 in 1976 and 1163.50 in 2016 it come out to… wait for it… ~500% (profanity) crazy how wages have increased to match the CPI. Also average wage is a bad measure, the Median is always better when dealing with these sort of numbers hence why they use it in housing, however the Median wage was not available in 1976, in 2016 it was 923.08 a week

      https://www.abs.gov.au/statistics/labour/earnings-and-work-h...

      Here is some other fantastic maths the cost of housing in the capital citys (excluding Darwin as there was no values in 1976 the average median housing cost in captial cities in 1976 was $36,250 the average median in 2016 was $513,000. That is an increase of 1315%

      that means in 1976 the average house in the capital cities was 3.6 times the average wage
      In 2016 it was 8.48 times the average wage.

      • +1

        I generated those numbers myself a few years ago using ABS data. I'm a data analyst by professional.
        I did the same for median house price and ASX200 however I didn't see the point in sharing them here (shares > houses > salaries > inflation).
        The numbers I posted are correct.

        Median is a far more representative figure than average. And Full-time is also more representative: the "real" average has come down in recent years due to women joining the workforce in much greater numbers resulting in an increase in part-time workers, however previously those people didn't work at all, so the true average wage back then including adults not working was significantly lower than reported as half the adult population earnt nothing.

        • I would be curious to see your working for those numbers considering you're a professional, I am always learning from someone in the field.

          The reason I prefer median is because you have the mega high earners overly influencing the average and on the opposite end of that spectrum the unemployed seeking work are not included. For wage I dislike using full-time because it only represents ~60% of Australia's working population so you're only working out the average of just over half that population.

          So if you look use the average full time worker in may 2018 the standard aussie earns $89,304.89 a year gross.
          If you look at the median wage the 50th percentile earns 57720.00 a year gross
          removing super the taxable income of these two groups is, 81,556.89 and 52,712.32 respective.
          Which means the average aussie earns 81,556.89
          But half of Australian workers earns less than 52,712.32

          According to the Grattan institute 80% of taxpayers earn less than $80,000 taxable income.
          So the average Aussie is represented by the top 20%. thought this was from data in 2017 so it may have changed by 2018.

          This is why I feel the average full time worker is not indicative of what most people experience hence why I prefer median in this case, if you can find other data show that much more people earn over 80K id love to see it.

          • +1

            @Bjingo: I don't have the workings as it was a few years ago (I did it in my spare time: I work in the mining sector, not finance). But I can do it again. Lets do 50 years this time. OK so you like average wages not restricted to full-time. See below:
            * In 1968 - 1969 the average salary was $68.90, whilst in May 2018 - May 2019 it was $1,238.30. That's an increase of 18.0x. Sources:
            https://www.ausstats.abs.gov.au/ausstats/free.nsf/0/3CE0FD337A1F0AB6CA2575160010C5CC/$File/63020_SEP1970.pdf
            https://www.abs.gov.au/statistics/labour/earnings-and-work-h...
            * Inflation from 1969 to 2019 went up by 12.2x.
            Source: https://www.rba.gov.au/calculator/annualDecimal.html
            * So over the 50 years from 1969 to 2019 our purchasing power has increased by 48%.

            You're comparing the average full-time wage to the median wage for all workers, hence the massive difference. For full-time workers only the average is $89k and median $76k. For all workers (full-time, part-time and casual) the average is $68k and median $58k.

            • @Viper8: Yeah that looks spot on, it is also the exact same as my calculation in the first example that came to the inflation matching the increase in wages. This shows how wildly wages increased between 1969 and 1976, which I find super interesting.

              I chose to compare the average full time to the median of all workers to demonstrate the massive difference between what is shown to be what a normal Australian earns, and what the majority of Australians earn. The median for full time workers in 2019 is 71k,76k is the median wage for men in 2019 and women's median wage was 65k.

              Also I think I made a mistake it looks like that 58k median wage is for full time and part time employees only and does not include casual, the last time they released median wage that included casuals was at the end of 2019.

              https://www.abs.gov.au/statistics/labour/earnings-and-work-h...

              also my bad about super I read super contributions were included and did not know they were only talking about voluntary contributions.

          • +1

            @Bjingo: By the way, super is not included in average weekly earnings.
            You can read more about it here: https://www.aph.gov.au/About_Parliament/Parliamentary_Depart...

    • +1

      time 2 time inflation formula change , mostly it does not reflect actual living cost

  • +2

    If you have to pay a fee regularly that is renting. So many people lining up to rent from the NSW government. This will drive down prices the same way privitizing electricity did. LOL.

    Owning a property has become a suckers game. You get taxed on the way in. You get taxed on the way out. And you get taxed on anything you make. But it's okay because you might get half back on what you spend on maintenance. Assuming the properties only go up in price is the same madness as expecting any kind of growth to never end. Much of the growth happened in the 70-90s so you missed that boat. People who earn $50k a year won't be able to afford $5M properties.

    I feel horrible for my kids. In 10-15 years this is their mess to deal with.

  • +1

    What is the rate of Annual land tax?

    Trying to figure out the break even point.

  • +2

    I'm thinking this could incentivize older people who don't require as much space/don't need to live in such a rich area to downsize and move out, which may make it easier for younger people to enter better sized housing. There's a lot of factors that come into play here that would affect housing prices but the best is that people can be more mobile now without needing to pay stamp duty every time they want to move and that is a big plus for everybody involved.

  • First up, efficiency is good, stamp duty is bad (for owner occupiers). However, the proposed tax schedule I've seen lists $500/annum fixed amount plus 0.3% per year for the rate component, significantly favouring more expensive properties. We can all agree stamp duty is ripe for replacement but this is just another trojan horse and not the solution we deserve.

    land value: fixed + rate = $$$$/annum=> effective annual tax
    $100k::$500+$300=$800/annum=> 0.8% p.a.
    $1m: $500+$3000=$3500/annum=> 0.35% p.a.

    For these values we see poorer household will be stuck with an effective tax rate ~230% that of the richer household, with less means to pay the lump sum to avoid it.
    $500 is not spare change and 230% is 230%. If you think $100k land value is an unreasonable comparison you probably think $120-200k is the salary of the middle-income earner.

    This is the second lot of sweeping tax changes from this government set to grossly favour the wealthy. From the Australia Insititute's discussion paper on income tax changes:
    "…high income earners get the majority of the benefit (62 per cent). Middle income earners get about half this (despite making up two and half times as many taxpayers). Low income earners get very little benefit, only seven per cent."

    While these changes all likely favour me I don't believe in grinding the bones of the poor to make my bread, ymmv.

    • -1

      Using percentages is pretty cool hey.

      A person earning $18,500.03 pays ~1c of tax.
      B person earning $19,000 pays ~$100 of tax.

      That’s 1 million percent more tax! How outrageous!

      But C person earning $1m pays $300k of tax.

      That’s just 300k percent more tax C pays more than B. How unfair of the tax system.

      ymmv

      • -1

        Demonstrating that the individual income marginal tax rate system works exactly as designed? Very clever, you've provided a great comparison. The entire purpose of the marginal tax rate system is to apply higher taxes to higher incomes. Importantly, that is not how stamp duty operated, nor is it how the new property tax is being presented. Stamp duty was a flat tax rate, applied the same regardless of the value of the property. As I have demonstrated this is clearly not the case for the new tax, which in fact applies higher effective tax rates to lower land values. You never really made a point beyond attempting to dispute mine so I'll just wait for it.

        edit: Might just have a crack at pre-empting your next argument - yes, one can incur differing GST liabilities depending upon whether one does or does not purchase a good. Spooky, almost as if it was designed that way.

  • Now we know how bad property is going to be as an asset class.

    If you look at all the billionaires very few have become billionaires from amassing property. They might be developers (buy land, build on it and sell all of it which is like manufacturers rather than buy build and hold) but never holders for the long term.

    If you are a shareholder the company came change domicile (move head office) for tax reasons but when stamp duty / land taxes change you can't ship your property to a lower taxing jurisdiction.

    I own property because I need to live in it. Don't want to be held hostage by corrupt politicians. Being a small investor having a property or two doesn't give you anywhere near as much lobbying clout as being a small shareholder in a listed bank.

    COVID19 I got screwed having to give rent reductions (and eviction bans) but banks still get their cut.

  • Lots of people are saying first home buyers don't pay stamp duty.

    In WA I was thinking of buying my mothers house from her deceased estate, but I didn't know if it would suit me long term. Turns out it wasn't eligible for the first home buyers stamp duty exemption because it wasn't newly built. Buying that house would have meant that I would have had to pay stamp duty and also lose the right to the stamp duty exemption in future. So the first home buyers stamp duty exemption was actually a disincentive to buying my first home.

  • Op, Can you please suggest me a neutral media outlet?. One that reports real stuff, you know?. I have been struggling to find one all along

  • Looks like its time to live on a boat

  • Will the govt refund the stamp duty they have grabbed already? Isn't this double dipping? <— invalid comment

    Edit: apparently it looks like a choice, i.e. pay one-off or go to the annual land tax process. It's would be nice to consider your option based on personal circumstances before buying.

    Official link: https://www.treasury.nsw.gov.au/property-tax-proposal

    Public Consultation: https://www.haveyoursay.nsw.gov.au/nsw-property-tax-proposal

  • +1

    People are more mobile now than ever before and living situations change more frequently now than ever before. Moving forward those trends are likely to increase.
    The average period of ownership is currently c7.5 years and most likely this will decrease over time.

    Given the above the real questions that I would be asking are:-

    “Why are people having to pay the best part of, and sometimes more than, a full year's wages just for the privilege of moving?”

    and

    “Why are people who move frequently subsidising the people who don’t?”

    and
    What about the unfortunate situation that some people might find themselves in where they buy a home only to find that they are incompatible with the neighbours, or their circumstances change and they need to move shortly thereafter again? Those poor individuals are up for another stamp duty tax slug. Perhaps another year's wages.

    • +1

      Removing Stamp Duty would make Real Estate a more liquid asset. SD as it exists today does act as a deterrent to moving more frequently. There are a number of benefits that come with the removal of SD such as:-
      - People could move closer to family - social and mental health benefits
      - People could move closer to work or schools - less road congestion and less pollution
      - Move closer to medical facilities
      - Lifestyle changes - seachange/treechange etc
      - Upsizing/downsizing

      Making it easier for people to move is good all round. It frees up lost time spent commuting which could improve people’s happiness and satisfaction levels from being closer to what they need and want. It would also help to promote a society that can move and live where they want when they want.

      • -2

        Just again brain washer

        -** People could move closer to family with Stamp duty and actually they pay nothing for rest of their life under stamp duty unlike life long TAX proposed by Liberal National Government **
        -People could move closer to work or school with Stamp duty and actually they pay nothing for rest of their life under stamp duty unlike life long TAX proposed by Liberal National Government
        -People could move closer to medical facilities with Stamp duty and actually they pay nothing for rest of their life under stamp duty unlike life long TAX proposed by Liberal National Government

        People could do everything with Stamp Duty that they want but with Proposed Liberal National Government Tax

        -People needs to pay rest of their life new TAX as long as they own the property
        -People needs to stay on renting if they don't want to pay new TAX for rest of their life benefiting rich and wealthy investor
        -Property prices goes up the sky as more investor enters the Market with less money to pay upfront to own the property making it harder for young and low & medium earner to own home
        -Young people will pay new TAX for rest of their remaining life which they don't need to pay under the stamp duty
        -More and more property will enter into TAX paying regime as under the scheme once property register as yearly TAXed property then you can't change it to stamp duty means all future owner has to pay TAX on yearly basis

        Fact remains, you pay TAX for rest of the life which will increase or you pay one off. Choice is yours and wise people knows what to do.

        • You repeatedly and consistently ignore the fact that the majority of people do not stay in the same home for their whole life. Once again I'll repeat
          "the average time of home ownership is c7.5 years"

          That one simple fact alone nullifies your argument.

          • @Bystander: The moving or selling isn't always about family or being closer to work or school especially when people are limited by budgets as to where they can afford or what lenders will lend.

            Plenty of it would be due to the increase in property value in that window of time (7.5yrs) and taking advantage of that to go bigger or try make money out of it.

            Ownership period would also include people who buy investment properties, sit on them a while and then sell them off, thats whats been fueling house prices in a lot of Australia for decades now.

            "one simple fact" not only sounds like a clickbait title but does not nullify the argument, it's far more complex than that.

            Why people can't see that changing a tax or a SD to a tax isn't so that people will save money, it is always for the government to collect more tax from us, they're not in the business of spending less and saving us money.

            (oh and that wasn't my neg either!)

            • @91rs:

              moving or selling isn't always about family or being closer to work or school

              Absolutely. The point I was making is that there is an endless list of reasons why people would want to move and why it is a good thing to make it easier.

              Why people can't see that changing a tax or a SD to a tax isn't so that people will save money, it is always for the government to collect more tax from us, they're not in the business of spending less and saving us money.

              I alluded to that very point here when I said "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." It's debateable as to whether a land tax is designed to collect more revenue but it's clearly at the very minimum all about protecting existing levels of revenue. ie. lower property values = less Stamp Duty.

    • If you need to move frequently or be mobile then rent, its so much more cost effective… and instead buy an IP and not a PPOR

  • +3

    Here is a perspective with some actual values using a mate's very recent purchase where he has paid $35,002 as stamp duty. Property value 875,000 and Unimproved Land value: 504000 (2019-20). Home is mortgaged at Variable rate of 2.74% at roughly 89% LVR.

    The proposal is a choice, i.e. pay Stamp duty or Opt for Land Tax.

    Stamp duty option: $35002 upfront

    Land Tax Option:
    500 + (504000 x 0.3%) = $2012 (for year 2020)
    Saving on interest at 2.74%: $35002 x 2.74% = $959
    2020 ~ $1,053

    Roughly 25 years down the line he would have paid $34,506.5 assuming 2.4% growth in unimproved land value but constant 2.74% interest rate saving in offset vs. the 35,002 upfront now.

    The official unimproved land value 5 years - average growth: 2.4% - 2015 - 445K, 2016 - 486K, 2017 - 518K, 2018 - 532K, 2019 - 504K in the above property (actual figures)

    Interest rates would most likely also move in the medium to long term resulting in reduced or increased savings. Have taken them as a constant for now.

    Conclusion: With time value of money and the time it would actually take for the annual land tax to catchup with stamp duty (under a mortgaged situation), my friend would likely be very close to retirement or would have moved on to bigger/better home and restarted the cycle (or even remortgaged and purchased investment). It would be better to opt for Annual Land Tax if the property purchase is simply a stepping stone into the market and not a long term thing, i.e. greater than 25 years. Also I am not sure if there is a concession for zero/low income earners or retirees which would then mean an exit from the Annual Land Tax regime altogether covering off the long term scenario.

    • For short term occupancy better option is to rent not to own and that any economist would advise you. as for 2 to 3 year who in correct mind buy the property and pay lifelong ongoing TAX every year on top all other TAX they pay and also the TAX that will go up every year.

      Second under the proposal once one person buy one property through lifelong property tax then all future owner has to pay the same and there no option for future owner to buy that property with stampduty. Which again is worst outcome as over the time there will be no choice left as all investor will be buying property with property tax and not with stampduty.

      • Lolz… the first thing an economist and accountant will tell you is that all there is no one right answer and it all depends on the situation. I can bet the same economist that you're quoting lives in their own hime.

        When you do the math you like I have done above you will see that the annual tax in the mentioned situation for occupancy between 0 to 25 years works out better.

        Another bit of math for is that renting a 2 bedroom home at $405 per week is more expensive than mortgaging a house at this time. The house ofcourse needs to be a reasonable value, i.e. below or up to the Sydney average of ~850K

    • Good example. The problem with this is if more ppl opt for property tax option, they have more cash at hand to jack up the price. I do not think the person can purchase it for $875,000 any more.

      In other words, if a property is targeted by more short term stay buyers than long term stay buyers in the bidding competition, the sale price will be higher.

      • I understand but if the law passes then it's not a what-if. All properties will get an impact regardless of the option you choose. So one can only work with facts. Also there are plenty of properties under the $875K mark even now.

  • Seems very unfair against those who have recently purchased a property and paid stamp duty (Essentially years worth of land tax) and would now have to pay yearly land tax.

    Encourages people to sell and buy houses more often as stamp duty penalty won't be an issue.

  • So, can anyone tell me what would be the approximate time you would have to hold a property to make the new land tax a better option than the current Stamp Duty lump sum? Or what is the approximate break even point?

    • +2

      It depends entirely on the value of the land. That can range from approximately 12 to 25 years.

      Given that the average period of ownership is c7.5 years the majority of people will be better off. And that's before you take into account the likelihood that people will move more often in the future.

  • The Henry Tax Review support replacing stamp duty with broad-based taxes such as land tax (pg 48), and that's probably all I need to know for the issue

  • +4

    This is getting bi-partisan support. So it isn’t just a liberals thing. It’s happening.

    The Henry tax review proposed this as a fairer tax outcome. Your post is potentially uneducated rhetoric feeding fear.

    For the average person this is good. This probably isn’t good for you OP because you have investment properties and will be holding property for a while.

    • -2

      There is no argument or case in the post which says that this lifelong TAX is bad for government. This new lifelong yearly TAX (subject to increase similar to council rates and all other items in the world) will benefit the Government and it doesn't require review as any economist would tell you the same.

      The benefit government will get be at a cost to the TAX payer that is everyday Australian who will end-up paying lifelong yearly TAX, so it is bad for younger people, future generation who has yet to buy property then those who already own one.

      It is definitely good for property investor as they can buy property with negligible upfront payment compare to stampduty, it is good for property investor as they can flip and sell the property, it will be good for real-estate agent, mortgage broker and of course the government.

      • +3

        fyi
        The word "tax" does not need to be capitalised.

  • At the current state "poor" people are not be able to afford huge lump costs of buying a property. The speculation market has heated up the property market, causing a impossible barrier of entry working and middle class to save up SD + deposit. Government has done everything that to allow first home buyers enter the market, however that creates huge burden on private debt to society so people can live in houses and work.

    SD creates an environment where encourages people to hold and speculate over a long period. An important aspect of LVT is that the landlord has to keep paying even if he currently has no tenant, to discourage speculation. A way landlord can only make money is by for example building higher (more area/apartments to rent), has higher quality housing or just somehow manages everything better, the landlord gets to keep the surplus.

    Over the long term, the market will let the land value increase if it is a good investment, as in the rent you can obtain relative to your invested money is higher than what you could achieve by investing elsewhere (which is one reason why real estate prices will continue to rise while long term interest rates fall). The economic rent as a signal is simply part of the land value.

    The heated property market discourages saving and encourages borrowing. Having low interest rates to keep the value of the land is unfeasible in the long term. In due time, increases in interest rates will hurt everyone more than a LVT.

  • Stamp Duty isn't the only large expense with buying and selling property. What about Real Estate Commission? That is a significant impediment on its own.

    • we can dodge real estate commission these days by getting a professional photographer and making our own listing on REA or domain website and run our own inspections.

  • +1

    Based on this poll, looks like majority of people are happy to pay old school stamp duty rather than new school land tax

    • Of course there's no way we could rely on a poll here for influencing policy. The best way to find out what the public want is to give them the option of choosing whichever tax they'd prefer. Then watch the real world stats.

      At the end of the day Stamp Duty is a tax on moving. Why would anyone want that unless they were sure they'd be in the same home for more than 12 years or more depending on value?

      • If a person has managed to buy their forever home for 30-40 Yeats occupancy. SD lump sum is the way to go especially if living off age pension welfare to assist with cash flow.

        • If you have a look at the statistics you'll see that the vast majority of people do not stay in the same home for 30 or 40 years. Our lives change much more often than they did in the past.

          • @Bystander: For that changing life you should rent ! Don't pay tax for rest of your life..!

      • Stamp duty isn’t a tax on moving at all.

        It’s a tax on buying property.

        Not everyone sells/buys when they move.

        • +1

          Agree, stamp duty is not the tax but proposed annual land tax is ongoing tax on property owners.

  • According to the below link stamp duty is much better than the proposed land tax. Refer to table showing the comparison done by Canstar

    https://propertyupdate.com.au/plan-to-abolish-nsw-stamp-duty...

    • From that article
      "By the fifthteenth year, the property owner will have paid $33,860 in land tax payments, which far exceeds the one-off stamp duty cost of $26,835 – by an extra $7,025."
      and
      "This means that by the time the owner has lived in the $1 million property for 15 years they would have paid $4,822 more than if they’d paid a one-off stamp duty fee."

      The average period of home ownership is c7.5 years which means that the average person will be better off with a land tax.

      • Not really people don't die after 7.5years so with land tax they keep paying annual tax for rest of their life and renter also pays same tax passed by investors…

        People rent for small duration of occupancy so stamp duty is far better for young generations, family who want to settle down in their home.

        • Have you looked at the real world statistics?

          The vast majority of people do not live in the same home for 30+ years.

          • @Bystander: It’s not how long a person lives in a property that matters.

            It’s how long they own said property….

        • and renter also pays same tax passed by investors…

          No, they don't.

          "A tax on rent would affect rent only; it would fall wholly on landlords, and could not be shifted to any class of consumers. The landlord could not raise his rent, because he would leave unaltered the difference between the produce obtained from the least productive land in cultivation, and that obtained from land of every quality."
          – David Ricardo, On the Principles of Political Economy and Taxation, Taxes on Rent, Ch. 10, 1817.

  • Does supporting the change from stamp duty to land tax mean you support speeding up gentrification? because a lot of expensive suburbs to buy into have existing residents that eventually will not be able to afford the land tax… bottom line is only high income residents will occupy an expensive suburb as low income existing residents leave.

    • +1

      Btw - i am of the belief that if you cant afford the stamp duty for the place you want to live now then lower your expectation and buy where you can afford now…. because if you cant afford to buy there now with stamp duty, you will have no hope after stamp duty gets replaced with land tax. Flipping homes will become rampant… that renovators delight opportunity to buy in an expensive suburb will be the next unicorn. Careful what you wish for people.

      • Flipping homes will become rampant…

        Quite the contrary!

        "Taxes raise prices by increasing the cost of production. This, in turn, reduces supply. But land is not something made by human production. Taxes on rent, therefore, cannot check supply. Though taxing land makes landowners pay more, it gives them no power to obtain more. For there is no way this can reduce the supply of land. On the contrary, it forces those who hold land on speculation to sell or rent for what they can get. A land tax increases competition among owners. This lowers the price of land."
        – Henry George, Progress and Poverty, Vol 8, Ch 3, 1879.

    • Existing owners are not affected.

      There is no proposal to charge land tax on homes that have already paid stamp duty.

      • Thats worst since no one needs to sell up and the land tax will disincentivise people to do so… Where is this additional housing supply being freed up going to come from?

  • 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.

    No, it won't. That's poor economic reasoning. David Ricardo already knew that over 200 years ago:

    "A tax on rent would affect rent only; it would fall wholly on landlords, and could not be shifted to any class of consumers. The landlord could not raise his rent, because he would leave unaltered the difference between the produce obtained from the least productive land in cultivation, and that obtained from land of every quality."
    David Ricardo, On the Principles of Political Economy and Taxation, Ch. 10, 1817.

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