Moving from stamp duty on property to an annual tax on land is a significant tax reform that can reap substantial economic and social benefits.  CA ANZ has consistently supported a move from stamp duty to property tax. However, moving from stamp duty to property tax will be difficult.  

Broadly, the NSW transitional proposal is that buyers will be able to choose between paying stamp duty (and where applicable land tax) and a property tax. However, once a property is subject to property tax subsequence owners must pay property tax.  This is referred to as the ‘opt in’ model.  With a quarter of all households occupying their current residence for more than 20 years, and only 25% of commercial properties being subject to land tax a substantial portion of the population will not have an incentive to opt in. The proposed opt in transitional method is likely to be protracted and complex with three tax regimes running in parallel for many decades.      

Choice avoids double taxation but increases complexity and revenue cost.  The consultation paper indicates that the voluntary opt in model will cost at least $2 billion per over the next four years and it will take 50 years to repay debt that is expected to be borrowed for this initiative alone.

The proposed transitional method raises issues regarding intergenerational equity, wealth inequality and housing affordability.  Yet details of the impact on the State budget, housing prices, and equity impacts have not been disclosed. This lack of detail makes it extremely difficult to form an educated view of the impact of this proposed transition. 

CA ANZ calls upon the NSW government to release the detailed distributional and financial modelling that has been undertaken to date so that the impact on future revenue and property prices can be better understood.   

CA ANZ also calls upon the NSW government to create a series of detailed consultation papers that discuss and cost the significant policy choices that need to be made, such as the choice of tax base and the availability of exemptions.   The long transition period will result in property market participants having to deal with three different taxes.  Advice on how to determine the impact of decisions to pay stamp duty and/or land tax versus opting in to property tax will be necessary.  As the law currently stands, accountants will not be able to assist their clients in relation to any of these three taxes unless they happen to also be a lawyer.  CA ANZ calls for the NSW government to make legislative changes to ensure that people who are a qualified accountant can provide advice in relation to State taxes.