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.