The lead candidate for a political party in NSW has announced a policy advocating for the removal of stamp duty in the state if elected.
David Leyonhjelm, former senator and lead candidate for the Liberal Democrats party announced a policy to remove all kinds of stamp duties, if successful at the upcoming NSW election, including stamp duties on property transactions.
This equates, when looking at the median cost of a property, to approximately $43,000, he said.
â€œAbolishing stamp duties in NSW would be a $9 billion annual tax cut. Each year the NSW government collects more stamp duty per person than other state governments: $1,100 instead of $1,000,â€ Mr Leyonhjelm said.
What does this mean for property investors?
By removing stamp duty, Mr Leyonhjelm said the major impact for property investors would be two-fold: improving the liquidity of property investment and attracting more investors to the property market.
â€œIf you buy bonds or shares, in fact almost any other asset, theyâ€™re relatively liquid in terms of being able to buy and sell them,â€ Mr Leyonhjelm said to Smart Property Investment.
â€œWhen you invest in property, thereâ€™s a very large barrier particularly to buying it, and you can sell it, but if then you want to buy another asset, youâ€™re faced with additional taxation.
â€œThe end result is people hold onto property assets for longer than they would if they were more liquid; people are deterred from investing in property more often than they would be if it was more liquid and the financial barriers were lower.â€
Peter Koulizos, chairman of the Property Investment Professionals of Australia, claimed the proposed policy was â€œterrificâ€.
â€œFrom memory, it was supposed to happen 19 years ago when the federal government brought in GST, because a lot of that GST revenue was going to go to the states, but the idea was they had to forsake their stamp duty revenue,â€ Mr Koulizos said to Smart Property Investment.
â€œItâ€™s 19 years late coming, but better late than never.â€
If this policy is presented to government and passes, Mr Koulizos said property investors would still feel the benefits, but to a lesser degree.
â€œMany property investors, if theyâ€™re looking to buy, say, their second or third or more properties, theyâ€™ve already got some equity in other properties, so they donâ€™t need to come up with a lot cash for a deposit,â€ Mr Koulizos added.
What does this mean for other property buyers?
Stamp duty is also a barrier felt by owner-occupiers, which Mr Leyonhjelm said was a deterrent and a â€œcruel hurdleâ€ for them to purchase property.
â€œOne of the big issues with stamp duty is the deterrent effect that it has on owner-occupiers upsizing or downsizing or moving because of their job to reduce the length of their commute,â€ he said.
â€œStamp duty potentially contributes more to frustration and family tension than any other tax.â€
Mr Koulizos said by far owner-occupiers would be the greatest beneficiaries of this proposed policy.
â€œPoor old first-home buyers, even if theyâ€™re going in with buying an owner-occupier home, they need 5 per cent of the value of the property as a deposit, and then they need almost another 5 per cent just for the stamp duties,â€ he said.
â€œThis way, first-home owners will be able to get in much easier than they have been in the past. I think itâ€™s great for everybody.â€
â€œPlus, also those people who are living in, say, a home that might be too big for them, and theyâ€™re looking to downsize and theyâ€™re worried that, â€˜When I go buy my next home, Iâ€™ve got to pay almost 5 per cent in stamp duty,â€™ that worry is gone. I think itâ€™s great for all players in the property market.â€
What else will be affected?
Not only would stamp duty on properties be removed, but the plan also involved removing stamp duty for cars and insurance.
â€œWhen purchasing a car, a stamp duty of either three or five per cent applies. This discourages us from upgrading, meaning our car fleet is one of the oldest in the developed world,â€ Mr Leyonhjelm said.
â€œThis reduces safety and adds to the road toll and emissions. Nationwide, car and fuel taxes exceed the cost of roads by more than $4 billion each year.
â€œTaxes on insurance make no sense. Why discourage people managing their risk through purchasing insurance?â€ the former senator added.
The proposed policy to removal all kinds of stamp duty is part of a fully-costed alternative budget by the Liberal Democrats to be published later in March.
Sasha Karen, Smart Property Investment, 14 March 2019