Abolishing Stamp Duty !

The average New South Wales home owner needs to consider this proposal to abolish stamp duty very carefully.  Every home in this state has already paid stamp duty when that home was purchased and this proposal intends to replace the tax with a small annual "property tax "that to some people sounds suspiciously like " rent ".

Initially, homes that have attracted stamp duty at time of purchase will be exempt from this property tax and the main loser will be the government.  Home purchases from the date of implementation will not pay stamp duty but instead will be billed annually for their share of the property tax.

It has yet to be decided how long properties that have already paid stamp duty will be exempt from this new tax but eventually  it will encompass all land in New South Wales and will be collected in similar manner to council rates.

At present, stamp duty is keeping many people out of home ownership because it represents about four   percent of the purchase price, and must be paid up front at the time of purchase.  Considering that the median price of a home in Sydney has now reached $ 1,211,488 that is a huge impost a buyer has to find as well as put down a deposit that will satisfy the loan application.

Obviously, people coming into the home market for the first time will gain a huge advantage, but those who have struggled and paid stamp duty and now own their home freehold will not welcome what will be to them a new tax, but they will gain an advantage if they need to downsize or sell and go into an aged care facility.

Under the present land tax regime, they will pay stamp duty on the new purchase because that tax applies on every property exchange. Initially, buyers have the option of paying stamp duty up front or choosing the property tax option, but that will only be available for a short period of time.  Then all purchases will be subject to the property tax.

The other factor involved is the shortfall in revenue the government will suffer when this new regime starts.  Instead of the bonanza from stamp duty this money will be replaced by a much smaller property tax contribution, and the rate in which the property tax is levied is very much in the hands of the government.

This proposal has its merits but all aspects need to be put on the table for public scrutiny before it is implemented.  Buying a house is usually the biggest transaction a citizen makes in his or her lifetime and some people get great satisfaction knowing their home is unemcumbered.  Obviously, there will be legal repercussions if land tax bills are allowed to accumulate unpaid.

It seems to be an option that will not suit all people.  Whether to pay a tax up front, or have it come around as a lesser amount each year  ?