The Federal Government is being pressed to dump stamp duty in favour of letting buyers choose an annual land tax.
The planned shake-up could make housing around 4 per cent cheaper and could mean home ownership jumps by around 6 per cent.
Furthermore, first-home buyers will be able to get their hands on a property over two years earlier if the upfront stamp duty is axed.
The NSW Treasurer is one of the state leaders who wants the Federal Government to help the states implement the change to help improve housing affordability and economic productivity.
If the burden of stamp duty is removed, it makes it cheaper to move homes for those who need to move closer to employment, easier for seniors to downsize and on the flipside of that easier for growing families to upsize.
“We are proposing a once-in-a-generation reform to make home ownership more achievable and affordable,” NSW Treasurer Dominic Perrottet told Australian Financial Review.
The NSW plan would be the biggest tax reform since the GST came in, but here in Victoria the state actually increased stamp duty in the last budget after considering reform prior to COVID-19 hitting.
Under NSW’s current plan, in the early stages the top 20 per cent of property prices would not be eligible to avoid stamp duty to take the edge off the hit to the state budget.
The annual land tax for those eligible homes would be priced at the value of the block of land before any building construction is considered.
Grattan Institute economist Brendan Coates said there could be huge benefits to stamp duty reform but the problem was working out how governments would pay for the loss of revenue.
“Revenues from the new land tax could grow more slowly than the stamp duty revenues it replaces over the long term,” he told AFR.
“It’s therefore hard to see the reform proceeding without at least some support from the Federal Government.”