14 October 2019
A key government economics adviser has flagged scrapping stamp duty in Australia’s largest State, in part because the tax is stopping ‘empty nesters’ from downsizing from the family home.
On 9 October, the NSW Productivity Commissioner Peter Achterstraat released a discussion paper on ways to improve NSW’s living standards. It is Mr Achterstraat’s first major publication.
The paper states that stamp duty is proving a major problem for downsizers, because "empty nesters may remain in large family homes rather than downsizing to a dwelling that better suits their needs as they age."
"This restricts the best use of existing housing supply,” the paper says.
The paper says that stamp duty is also a major problem for workers, by making it more difficult for them to move home when they change jobs or pursue new career opportunities.
The paper seeks feedback on the possibility of removing stamp duty, and replacing it with a broad-based land tax.
Such a move will axe the major one-off stamp duty impost when purchasing a property, and replace this with an ongoing - most likely annual - tax which would apply to most or all land.
Currently, NSW non-first home buyers of median-priced established houses have to pay $34,807 in stamp duty in Sydney and $16,357 in regional areas. The State earned $7.4 billion from the tax in 2018-19.
Reforms in other Australian States and Territories
The Australian Capital Territory is the policy leader in this space in Australia, after embarking on a 20-year program to replace stamp duty with an annual tax in 2012.
This reform is seeing Canberra’s stamp duty rate progressively reduce each year, and also appears to be helping the nation’s capital grow as a downsizing destination.
The idea of replacing stamp duty with a broad-based land tax has also been supported by the Western Australian branch of the Urban Development Institute of Australia.
Stamp duty is regarded as one of the biggest barriers to downsizing, with a survey conducted by Downsizing.com.au and LJ Hooker in 2017 finding that 27 per cent of people nominated stamp duty as the one incentive which would help them downsize.
Currently, only the ACT, Victoria, Tasmania and the Northern Territory offer stamp duty reductions for seniors or downsizers.
Consultation on NSW paper open until November
Consultation is open on Mr Achterstraat’s discussion paper until 27 November 2019.
This process will help inform two NSW Government-backed policy papers, to be released next year.
NSW Treasurer Dominic Perrottet said he was looking forward to seeing the feedback that will be received from Mr Achtersraat’s discussion paper.
“This is a great opportunity for everyone to have a say in shaping our future. Peter Achterstraat has been charged with raising issues and ideas which are important for all of us to discuss and then weigh up whether they will benefit NSW,” he said.
By Mark Skelsey, Editor at Downsizing.com.au