The strength of the property market in New South Wales has helped the state government become almost debt free, as it benefits from increased stamp duty revenue.
According to a budget update released yesterday, NSW’s net debt level has shrunk to $1.8 billion, the lowest it has been in two decades.
The reduced debt levels are thanks in part to an additional $863 million which has been collected in stamp duty charges since June budget estimates.
According to the government, around $430 million of that came from stamp duty associated with the sale of electricity provider TransGrid, but a large proportion of the remainder came from property transfers.
“The windfall transfer duty we are expecting to receive in 2015-16 is primarily made up of stamp duty from the TransGrid transaction and commercial and industrial property transfers," NSW Treasurer Gladys Berejiklian said.
The government’s increased revenue announcement has again prompted the Property Council of Australia (PCA) to go on the attack as it renews calls for the tax to be abolished.
“Stamp duty is our most damaging tax and hurts homebuyers, businesses and the economy," PCA NSW executive director Glenn Byres said.
“NSW continues to haul in record levels of stamp duty – which has doubled in the past four years from around $4 billion to well above $8 billion,” Byres said.
While Berejiklian said earlier this week that stamp duty revenue is expected to moderate as Sydney’s property market cools in the coming year, Byers said the damage has already been done.
“The affordability woes facing homebuyers are exaggerated by stamp duty, which forces the average homebuyer in Sydney to find an extra $35,000 when they purchase a house,” he said.
“Stamp duty hurts people trying to crack the housing market, families needing to buy up as they grow, and people wanting to downsize later in life.
“And signals about a slowdown need to be treated with caution – as stamp duty is still poised to rise by approximately 15% this year and stay above $8 billion for the next few years.”
But Byers and the PCA may be protesting in vain, with one tax expert believing stamp duty is likely to be around for the foreseeable future.
“Our view is that stamp duty is likely to be here until will see substantial changes to areas like payroll tax and the GST,” David Shaw, director at accountancy firm WSC Group, said.
“It’s an inefficient tax, but it’s one that people are going to have to keep factoring in,” Shaw said.
While there was speculation earlier this year that an increased or expanded GST could be implemented to replace stamp duty, Shaw said that’s highly unlikely.
“We’re not going to see an increase in the GST until the states can agree to it and that’s not going to happen anytime soon.
“They all want to protect their self-interests and there will need to a whole discussion about how the GST revenue is distributed among the states.”
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