A NSW government proposal allowing homebuyers to pay an annual levy in lieu of stamp duty is an example of tax reform that could benefit all Australians, the state treasurer says.
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An average NSW property comes with an up-front $34,000 stamp duty requirement, which takes most people two-and-a-half years to save.
When releasing the 2020/21 budget on Tuesday, Treasurer Dominic Perrottet described the impost as "a relic from a bygone era", adding the climate was right for states to work with the Commonwealth on overhauling some tax systems.
"Tax reform is challenging, it is tough, it's been talked about for a long time," he said.
"We have great unity among the states ... to work with the Commonwealth government to drive reform."
The NSW proposal, which will be open for public feedback until March, would replace stamp duty with an annual tax based on land value, to help more people enter the market.
The government said it could save a buyer $20,000 over the first four years of home ownership.
Buyers will still be able to choose to pay their duty up front.
The Labor opposition was critical of the scheme's lengthy implementation timeline, noting it was a decade ago that the Liberal-Nationals first wanted to revamp stamp duty.
Opposition Leader Jodi McKay also flagged concern that the scheme came along with undesirable consequences.
"For the first time in NSW it appears there will be a land tax on farms," she said.
Adam Rigby, CEO of national agency Upside Realty, said the change to stamp duty could help the property market early in 2021 when he expects an influx of listings to coincide with the end of government coronavirus stimulus payments.
"The government needs to be careful in making clear that buyers who transact prior to this change will not be worse off, as this will have the opposite of the desired effect in the short term," he said.
Under the current scheme, state revenue from property transfer duties will take a $1.2 billion hit in 2020/21 as COVID-19 put restrictions on real estate auctions.
However, the expected $7.9 billion to be collected still represents a 14 per cent increase on last financial year.
Gambling and betting tax revenue is expected to be $2.8 billion in 2020/21, an increase of almost $50 million or 1.8 per cent.
Mining royalties are forecast to fall to $1.4 billion.
"The much weaker outlook for coal royalties is due to a combination of lower than previously forecast thermal coal prices and a higher-than-anticipated Australian dollar," the budget papers said.
"Improvements to the expectations for gold and copper prices and production volumes provide a minor offset."
NSW will also take its shared cut of national GST revenue, at $16.3 billion, down from $18.1 billion in 2019/20.
The Liberal-Nationals government will reduce the payroll tax rate from 5.45 per cent to 4.85 per cent for two years to aid coronavirus business recovery.
"And we will permanently raise the threshold to $1.2 million (turnover), almost double Victoria's," Mr Perrottet said.
Payroll tax remains the state's largest source of taxation revenue, growing by a forecast 0.2 per cent to $8.5 billion for 2020/21.
The tax measures received a glowing endorsement from the Business Council of Australia.
"Every premier and chief minister in the country should be watching because NSW has set the standard for building a strong business-led recovery," chief executive Jennifer Westacott said.
"The government's blueprint and tax reform agenda will help make NSW the best place in the country for businesses who want to invest, expand and create new jobs."
Australian Associated Press
