The New South Wales premier, Dominic Perrottet, will seek federal government help to scrap stamp duty during a meeting with prime minister, Anthony Albanese, on Friday, insisting no change can be made to the “inherently terrible” tax without support.
Perrottet been a vocal proponent of scrapping stamp duty in NSW since he flagged his ambition to move to an annual land tax as the state’s treasurer in 2020.
At the time, it was flagged that homebuyers could choose to opt out of paying stamp duty in favour of an ongoing annual property tax. Stamp duty would later be abolished altogether, with the move to annual payments predicted to inject as much as an additional $11bn into the state’s coffers over four years.
Despite a consultation paper being released last year, progress on the reform has been slow.
But on Monday the Sydney Morning Herald reported the government had signed off on a proposal to push ahead with the reform to allow homebuyers be able to opt-in to an annual land tax.
The Top 20% of residential properties – which make up the vast bulk of stamp duty receipts – will reportedly be excluded from the proposal, in an attempt to stave off a significant hit to the budget.
NSW collected about $9.4bn in stamp duty last financial year, making up about 28% of the state’s total tax revenue, and industry groups have warned it would take decades to recoup if it wasn’t offset by federal reform.
The state’s treasury department has previously estimated that Perrottet’s proposal for an optional land tax would leave the budget short to the tune of about $2.5bn a year.
But on Monday Perrottet moved to downplay expectations the government would be in a position to scrap stamp duty. He said that while there would be “announcements in relation to housing affordability” in next week’s budget, any wholesale changes were still dependent on federal assistance.
“Stamp duty is the worst tax that any government can have,” he said during a visit to flood-hit Lismore.
“It is a massive impediment for people getting into the housing market. But … state governments can’t do away with stamp duty without support from the federal government.”
Perrottet is due to meet with Albanese for the first time since the election on Friday, and said he would seek the commonwealth’s support, as tax reform had been in the “too hard basket” for too long.
“This is a moment for the federal government and the state governments to work together to unlock opportunity and economic opportunity,” he said.
“For way too long in this country we have not had the reforms that we had under the Keating era and the Howard era … Governments are too focused on a 24-hour news cycle. Oppositions are too focused on a media grab.
“All these reforms, which everyone knows what the right thing to do, sit in the too hard basket … because there’s not the political will to do it. Here’s the opportunity right now.”
While the new federal treasurer, Jim Chalmers, has indicated a willingness to discuss changes to stamp duty before a meeting with state treasurers next month, he has made no commitments. On Monday he said any decision on stamp duty reform were “ultimately matters for the states”.
Labor has questioned whether the shift would be affordable for most homeowners.
On Monday the shadow treasurer, Daniel Mookhey, said Labor’s analysis of the proposal shows the owner of a median-valued property in Sydney would pay about $2,400 a year in land tax.
He said that while the annual tax would be optional initially, the land tax would remain in place for a property even after it was sold.
“I don’t know where Mr Perrottet thinks that working families could find the money to pay him an annual land tax on their home that lasts for ever,” he said.
“Our modelling shows that a typical family in Sydney will start paying $2,400 each year from next year if Mr Perrottet introduces this tax.”
Perrottet has long complained that GST arrangements mean state governments are often punished for attempting tax reform, and the NSW treasury department’s own consultation paper on his proposal last year also warned that the change could cost the state about $1bn in GST revenue each year.
Perrottet has previously called for a “productivity fund” to avoid penalising states for embarking on tax reform.
But the premier, and many economists, insist scrapping stamp duty would also stimulate the economy. In the same paper Perrottet argued it would allow more than 300,000 first homebuyers to enter the property market.
While many industry groups have welcomed the proposal, others say it must come with additional assistance, particularly for seniors or low-income homeowners.
“If it is going to be enforced by all sides of politics, it’s a good opportunity to reform the whole system,” Shelter NSW’s chief executive, John Engeler, said.
“There will be some hardship provisions that need to be included. There will be some older people living in properties who just won’t have the income to ever pay property taxes,” he said.
“They are flat-out trying to pay their rates or their strata fees.”
