Australia’s Largest State Mulls Major Property Tax Reform

(Bloomberg) -- Stamp duty on property purchases in Sydney could be scrapped as part of a major reform of the local taxation system, New South Wales Treasurer Dominic Perrottet said in an interview with the Sydney Morning Herald.

”There is no better time to rid the states of inefficient taxes that hold back economic growth and I am talking stamp duty and payroll taxes,” Perrottet said. “We are not going to tax our way back into prosperity. Increasing or decreasing taxes is not tax reform.”

Stamp duty, which must be paid as a lump sum on a property purchase, has been criticized by economists as providing a disincentive to move and reducing mobility in the housing market. Currently, a buyer of a typical A$1 million ($641,000) home needs to pay an additional A$40,000 upfront.

Reform efforts have long been stymied by the fact the tax is also a major -- if volatile -- source of state revenues.

In Sydney's housing boom years, stamp duty accounted for 31% of the Australian state revenues. In 2019-20, that was forecast to slump to 22% as is likely to fall even further given the coronavirus shutdown.

Perrottet didn't give any indication in the interview as to what he would like to see replace stamp duty.

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