Today’s announcement by Premier Perrottet that first home buyers could opt into a land tax was a baby step in the right direction of a broader land tax base.
“NSW landholders benefitted to the tune of $705 billion in just 2020-21, and were only required to share $4.8 billion with their fellow citizens via current land taxes. Increasing that share with all residents has the potential to lower the tax burden on employers, on the average taxpayer. As such, we support moves toward land taxes because it helps the pie grow for everyone,” said Karl Fitzgerald, Advocacy Director at Prosper Australia.
“NSW has shown genuine leadership on the needed land tax transition and should be congratulated. However, this reform is more a conversation starter on a potential land tax future. We are overdue to see real policy outcomes which could have a meaningful impact on the macroeconomy.”
“Insights from our detailed work on the ACT stamp duty to land tax transition shows that homemakers were more willing to overpay when bidding for a home. Public education will be key for younger buyers who may not grasp the implications of an annual land tax. Investors, by contrast, enjoy advice from seasoned professionals, which not all first home buyers have access to.”
“We expect that home sellers will be the big winners in this announcement, enjoying a demand side fillip during a softening market.”
“The risk with this policy is that it will put upward pressure on prices. First Home Buyers will have $50,000 in stamp duty savings that may simply find its way into a higher purchasing bid.
With land tax rates very low and revenue shortfalls expected to result, we hope that the business community will not be required to do more heavy lifting with a potential payroll tax increase.”
Further reform impetus would encompass the policy transition advocated by Prosper Australia:
- a revenue neutral reform – as is being achieved by the ACT
- a rapid transition of all properties, rather than only those sold to a small cross-section of FHB’s
- credit for recent buyers who have paid SD
- a time limited opt-out to smooth market expectations for the first few years
“An effective land tax transition would give us a much needed productivity bump, as well as prompting under-utilised land and housing onto the market. There is a huge opportunity to realise these potential benefits, but for now, the NSW has chosen to keep them in the back pocket.” stated Fitzgerald.