IN the March NSW election, the annual property tax v one-off stamp duty issue is unlikely to be the main issue.
But since in the long run the introduction of a property tax would result in an unaffordable financial burden for so many people, it’s worth outlining the positions taken up by the parties contesting the March election.
The NSW Government, made up by the NSW Liberal Party and the NSW National Party, has pursued the introduction of a property tax for a number of years. It started with the Fire and Emergency Services Levy in 2017, which was a disguise for a property tax. This proposal was abandoned after a public backlash.
The NSW Government again proposed a property tax in 2020. Its gradual introduction was to take decades, as home buyers would have had the choice between stamp duty and property tax. But once a home had become subject to the property tax, subsequent owners would have had to pay property tax. This proposal was abandoned after it became clear that, crucially, there would be no federal financial support.
Undeterred, the NSW Government introduced a two-year property tax trial for first-home buyers. They will have the option of paying the upfront cost of stamp duty or a small, annual property tax payment of $400 plus 0.3 per cent of the land value of the property. Homes purchased under this scheme revert to stamp duty once they are on-sold to a non-first-home buyer. The scheme, which is operating now, will cost $664 million though over the two-year trial period because annual revenue from property tax is lower than stamp duty revenue.
Arguably, the current property tax trial is in reality just another subsidy scheme for first-home buyers. Once they move on, they will have no option but to pay stamp duty on their second and subsequent homes.
NSW Labor and the NSW Greens opposed the first-home buyer property tax trial on the basis that it was a thin-end-of-the-wedge attempt to introduce a wider property tax scheme.
NSW Labor has vowed to abolish the property tax trial if it wins office in March this year. In addition, it has announced that the budget set aside for the property tax trial will be used to give stamp duty discounts to first-home buyers. There would be a stamp duty exemption for homes under $800,000 and a concessional rate up to $1 million.
CPSA’s position is that there should be no annual property tax on homes as this tax will become unaffordable for many people once they reach retirement. Even a two-year property tax trial for a limited category of homebuyers is inappropriate as it can serve as a model for the introduction of a general property tax without any real consideration of how people on low incomes would pay it.