The Minns government’s move to lift the threshhold on stamp duty on a first home must feel like a lottery win for some young Sydneysiders dreaming of buying their own home. But for most, it’s a division four win at best. They’ll have to wait another day and stay renting.
It is also a missed opportunity for the new government to step away from a blunt tax long past its use-by date.
The newly elected Labor government this week introduced legislation to extend current stamp duty exemptions for first home buyers, lifting the stamp duty-free threshhold from $650,000 to $800,000, and introducing a concessional rate for homes between $800,000 and $1 million. It will end the Perrottet government’s flagship property tax legislation, the First Home Buyers Choice, which was a good initial step in a complete overhaul of stamp duty that allowed eligible purchasers to choose between paying stamp duty or an annual levy.
To back his legislation and undermine the existing scheme, Premier Chris Minns released Treasury modelling figures showing that while 13 per cent of first home buyers bought properties between $1 million and $1.5 million, they represented 52 per cent of the people who opted in to the Perrottet scheme. Minns claimed it was a “lot of subsidy for people who are purchasing a property above $1 million for their first home”.
Stamp duty is the most wretched of all taxes. It not only is full of exemptions but deters people from moving. In 2010, the Henry tax review found housing affordability could be improved by abolishing stamp duties (and changes to negative gearing as well as modifying current land tax arrangements). State governments did little in the 15 years since Henry recommended its abolition.
Yet, the same day Minns introduced the legislation to scrap the land tax option from July 1, Victoria’s Labor government tightened the same screw NSW was undoing, lowering the land tax threshold from $300,000 to $50,000 on investment properties and holiday homes in Tuesday’s state budget. The move affects about 380,000 Victorian home owners who previously had not paid the tax. Victoria also revealed plans to scrap stamp duty on commercial and industrial properties.
Any reforms that ease pressure on first home buyers, of course, are welcome. But Minns’ changes have a touch of window dressing. In fairness, Labor promised to abolish stamp duty during the recent election campaign and the legislation upholds those words. But it delivers little benefit: the eligibility to escape stamp duty is so limited it does little to help young people shut out of home ownership, not least because average and median house prices are way above the stamp duty-free threshold or concessional rate.
Amid Sydney’s crippling housing affordability crisis, many will question how far the changes will go towards alleviating the lack of affordability. We do not think it will go far. They may assist new home buyers in rural NSW. But in Sydney? Forget it. Sydney house prices lifted 1.3 per cent last quarter, or about $18,300, to a median sale price of $1,459,856. Unit prices increased 0.7 per cent over the three months to March to a median of $758,664.
The supports the phasing out of stamp duty and the growing momentum behind property taxation reform to deliver lasting social and economic benefits to the people of NSW. Lifting the threshhold on eligibility to avoid paying stamp duty is an illusory fix for the housing crisis. The Minns government’s persistence with an outmoded money raiser – it was introduced in 1865 – is a retrograde step that risks NSW falling behind as other governments look at reforming a major source of revenue for state coffers.
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