The NSW Review of Federal Financial Relations unveiled the draft of its report to the state government, calling for several tax reforms.
David Thodey, Chairman of the New South Wales Federal Financial Relations Review Committee, said that state and federal government should give priority to the phasing out of many "unfair and damaging" taxes in the country, including stamp duty and insurance tax.
"Any reform will have to be carried out in such a way as to provide safer and more reliable funding for states and allow them to gradually rebuild their balance sheets for the benefit of future generations," he said in a statement.
One of the report's recommendations is the replacement of stamp duty by a general property tax. He said that a broad-based property tax is more efficient and fairer than the current transfer right. A copy of the report is available here.
The report found that the NSW state government raised approximately $ 7.1 billion in stamp duty in the 2018-2019 fiscal year. This makes the state of stamp duty the second source of tax revenue.
Read also: Wish list of the real estate industry
"In the case of transfer taxes, those who buy and sell goods more often to pay more taxes, compared to those who transact less frequently," says the report.
This means that the cost of essential infrastructure and services is passed on to a small segment of the population "who bears the burden" simply because they decide to move or sell a business more often, the report says. .
The report indicates that a property tax would be a more equitable approach to funding government services, based on the "pay-as-you-go" principle.
"The value of land is a measure of the benefits for particular locations of infrastructure, services, regulations, market access, amenities, culture and community. A Property tax is therefore like a generalized user fee for the society as a whole benefits the landowner, which is a principle-based means of funding public services, "said the report.
While Replacing Stamp Duties with Property Tax Is Unlikely to Change Real Estate Prices In The Short Term, Report Could Improve Housing Affordability Longer term.
Adrian Kelly, President of the Real Estate Institute of Australia, said that the recommendation to abolish stamp duty is a step in the right direction for the housing market.
"There are many previous studies which reinforce the conclusions of this report that the removal of the effective tax on stamp duties will bring economic and social benefits, notably by facilitating affordability by reducing the costs of property purchase transaction, "he said.
Kelly said that economic activity in Australia could be lifted by shifting the tax mix from high economic cost state taxes to lower cost Australian taxes.
"As the report notes, state governments cannot eliminate ineffective taxes without going into deficit or having to cut spending considerably. Therefore, cooperation between the Australian government and the states is necessary to undertake the reform of ineffective state taxes, "he said.
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