This brief summarises new modelling on the revenue impacts of the model floated by the NSW Treasurer, and explains the key trade-offs involved to inform public policy debate.
- Replacing stamp duty with land tax has the potential, if enacted sensibly, to support budget recovery without impeding economic growth.
- The NSW and Victorian Treasurers are to be commended for taking on the challenge of reform.
- The NSW Treasurer appears to favour a two-part transition model for stamp duty to land tax: switch-on-sale (full grandfathering) for existing property owners and voluntary ‘opt-in’ for new buyers.
- In NSW, this transition model will take more than 50 years and cost over $120 billion in foregone revenue – some 20% of GSP.
- In its final report The NSW Review of Federal Financial Relations (Thodey Review) must properly address the limitations of certain transition models in order to avoid inadvertently derailing land tax reform.
- The NSW Government cannot be allowed to to rush into commitments it neither can nor should deliver on.