Proposed NSW property tax changes labeled ‘absurd’

The Real Estate Institute of NSW has called the state government’s proposed changes to property taxes “nonsense”.

REINSW chief executive Tim McKibbin said the idea of ​​adding a new type of tax will not help alleviate housing affordability issues, which are already a huge burden on NSW residents.

Under the proposed changes, homebuyers would have the option of paying either an upfront stamp duty or an ongoing property tax for the length of time they own the property.

Mr McKibbin said the changes would not reduce pressure on house prices, but would simply shift the cost to other segments of the market.

“You can’t tax something to make it cheaper,” McKibbin said.

“The property tax has the potential to create a two-speed market. A buyer can choose to pay stamp duty or property tax, but if it is the latter, a future buyer will not have the same choice, because the property will already have entered the property tax regime – and it there is no way out.

“It will disrupt demand for this property. Prospective buyers should be prepared to pay property tax, as other properties will always offer a choice and therefore be more in demand.

Mr McKibbin said that for existing owners who paid stamp duty, there would be a disincentive to sell and buy again as they would have to pay property tax.

“Affordability is inextricably linked to supply,” McKibbin said.

“Dissuading people from selling is in direct contradiction to freeing up the available housing stock.”

Source: NSW Government Progress Document, June 2021

According to the June 2021 progress document, stamp duty was introduced in 1865 and has overtaken property prices and income in recent years.

The NSW government is set to collect $14billion from stamp duty this financial year, and Mr McKibbin said he was addicted to high property taxes.

“Stamp duty tax brackets have not changed since 1986 and by not adjusting to the CPI, more and more properties are subject to higher rates,” he said. .

“It is dishonest of the government to talk about affordability while raking in billions every month in stamp duty from real estate consumers.

“Even so, at least with the stamp duty, while it’s a huge tax, once paid, it’s done. The burden of a property tax is eternal.

“If the government is sincere in helping first-time home buyers, the answer to affordability is extra supply, a much improved AD process and tax cuts. Since 40% of the cost of a new property is taxes and fees, a serious discussion about affordability should start there. »

McKibbin said REINSW would like first-time home buyers to be exempt from stamp duty and empty-nest relief, to encourage them to downsize and free up homes for families who are stumbling. enlarge.

“People go to work knowing they have to pay taxes, but that doesn’t stop them from going,” he said.

“In contrast, people choose to stay in a property that does not meet their needs, especially pensioners, because they are unwilling or unable to pay stamp duty.

“When a tax becomes consideration for a transaction, it is a bad tax. That’s what stamp duty already does and that’s what a property tax will do. Trading one bad tax for another will not help affordability.

Penny D. Jackson