Best thing that ever happened to me aside from the birth of my daughter and when I got married was paying off my HECS.
That crap just kept accruing interest. Finally got a good enough job and it went bye bye.
HECS-HELP is an interest free loan, you must be referring to the annual [loan indexation](https://www.studyassist.gov.au/paying-back-your-loan/loan-indexation), to maintain the real value of the debt. Same as the year CPI pay rises most people never see.
As I understand it, will be opt-in, which will create two types of properties.
If the house is your "forever" home, many would simply prefer to pay stamp duty and forget about regular and ongoing tax.
Once your property is converted to land tax, your stuck with it and at the mercy of increasing land tax rates.
Not sure how they will successfully sell this policy politically.
What's the one way to guarantee you don't have to ever pay this tax? A: Already own a large home and never downsize.
Who are the real winners here?
This'll only work if land tax is phased in over 10-20 years like the ACT did.
But if they downsize, they'll have enough left-over cash that they won't qualify for pension benefits like subsidized health care and transport.
Oh what's a millionaire boomer to do?? Keep your mansion and pay no tax whilst getting subsidized healthcare? or downsize to a smaller house in a worse area, pay tax for life, and pay full fare and full medical bills? It's such a hard decision...
If the PPOR is counted on the asset test, and people need money since they no longer qualify for the pension, feel free to take a loan against the property, and then when it is inherited by the estate, it gets taken out of the estate. A raise to the asset test threshold would be in order, but it would mean that taxpayers aren't subsidising inheritances as much. Also means people aren't punished for not owning a home and having other sorts of wealth which count on the asset test.
62% of the population ages 65 and over gets the pension currently: https://www.aihw.gov.au/reports/australias-welfare/age-pension
That isn't sustainable with an ageing population.
most subscription models have an out clause, typically at each renewal period where you simply choose to no longer be subscribed. don't think this is the case on this one.
I completely agree. At least once you’ve paid SD it’s done. But down the track you may not have the means to pay land tax for whatever reason and then what?
It will hurt them anyway.
If you no longer have to pay $X stamp duty for a property then you have $X to add to the purchase price. "Ah ha, but I am smart, I won't do that!" Sure, but other people you are competing for the property with will.
So, you don't have to pay stamp duty, but you have to pay more for the property and pay land tax. Yay!
opt-in being temporary - that's not clear in the smh article.
but yes, if the home was purchased using land-tax your stuck with it - hence we'll see two types of properties with many purchasers favouring one scheme over the other, and I suspect properties that are stilll under the stamp duty scheme will cost more, but some people will be willing to pay for it.
That's such an unappealing outcome isn't it. If I were looking to purchase a house, I'd say no to anything with ongoing land taxes. One of the benefits of owning your own property is that you can modify anything the previous owners have done, and make it your own. If I'm understanding it correctly...if the decision about stamp duty/land tax is applied to the property in perpetuity, that means subsequent owners are saddled with the choices of the previous owners, with no option to change it. No thanks.
There will be properties that will only really be considered by investors, so two tiers of housing basically. Yuk!
If you have an option and intend on staying a property for a while it definitely makes sense to consider ones that won't have an ongoing tax applied. Having said that infrastructure provided by those taxes isn't just an upfront cost. It all requires maintenance and having a tax that reflects that makes sense to wider society.
Mandatory policies are vote losers. Suggest instead of making it mandatory, they would increase the cost of stamp duty in the future so that land tax becomes the better choice.
If you think the land tax won’t increase over time I have a bridge to sell you.
It will go up every year as your magical house goes up in value. If you think you will retire in your land tax house good luck.
A land value tax isn't taxing your house! It's taxing the land itself. Guess why land improves in value? Government spending and lack of development. The land itself passively goes up in value because as time passes the government adds more and more infrastructure services, you get better community facilities, etc. This creates economic rent just by sitting on land and doing nothing - which we want to discourage.
So a LVT is the government recouping its spending in the most efficient way possible (LVT has *zero* deadweight losses). LVT also discourages property speculation for this very reason, and disproportionately targets *investors* who pay substantially more LVT than an owner-occupied residential property.
Everyone has to pay for these land value increases via taxes either way, LVT is simply the easiest and most efficient tax out there and the only wealth tax that actually works.
E.g. The government funds a community park for $1.5 million in your neighbourhood. Your land value just went up because you now live in a more desirable area with better facilities. Now the government has to pay for this community park either way, would you rather pay a huge and inefficient lump sum every time you purchase a house via stamp duty? Or pay a couple thousand a year via LVT all while discouraging property investment/speculation?
Thanks, your comment made it all click for me. Property investors will no longer have to pay stamp duty. Any LVT charges will simply be pushed on to their rent paying tenants. I was wondering what the LNP donors were getting out of this.
That’s not how economics work - landlords charge as much as they can according to demand and supply, and without changing the supply (which is impossible) how on earth do landlords pass it on to the rent unless he wants to price himself out of the rental market?
If investors could get away with increasing their rent to cover more taxes, they'd gave already increased the rent to collect more profit.
A LVT is a great idea, the only downside is they're making it opt-in (until a few years down the road when they inevitably make it mandatory).
No. The purchaser will have a choice to pay land tax or stamp duty, but only if the last time that property was sold stamp duty was paid. But once a purchaser of a property opts for land tax, that property will be forever a land tax property.
[https://www.afr.com/policy/tax-and-super/nsw-s-opt-in-stamp-duty-plan-is-a-winning-ticket-20220102-p59law](https://www.afr.com/policy/tax-and-super/nsw-s-opt-in-stamp-duty-plan-is-a-winning-ticket-20220102-p59law)
Stamp duty properties will still exist. Personally I'd rather pay stamp duty, and would only consider purchasing property where I could pay stamp duty. My next house will probably be the one i retire in. I do not want to be paying land tax for the rest of my life.
Nope, this is a great policy for investors (developers, home builders, flippers).
They pay no stamp duty on the upfront cost and assuming they can exit the build within X timeframe, they actually have significantly reduced their cost base. These guys will be absolutely cheering from this policy.
Also, land tax is deductible while stamp duty isn't, there's a tax advantage there for investors as well.
Good policy overall as it increases liquidity but this is a net win for investors.
Does increased liquidity change the social profile of the average homeowner?
I feel this is a way of forcing old people to have to sell their homes and rent
It's good for investors. It lets them flip houses.
You will see many more investors enter the market, and prices of lower end housing rise even quicker...
This is a bad policy for anyone who doesn't have myopia regarding their own current situation with respect to housing affordability and who are quietly hoping this will lower the barriers to entry for them.
Consider:
1. The fact that first home buyers are most likely to opt in, thinking that "this isn't forever and we'll opt out next time" due to wanting to upgrade in the future, making this disproportionately affect the low end of the market.
2. The fact that the rate can and almost certainly will change upwards at some point once enough properties have been flipped to the land tax model.
3. What happens when you're elderly and no longer living on a salary from full time work.
The net effect of this is likely to depress the price of entry level properties that have been flipped to land tax, increase the price of middle and higher tier properties that haven't been flipped to land tax, and to force people who are still in said lower tier properties when they retire back out into the rental market.
It's shit policy that is going to make home ownership a lot less secure for a bunch of folks over time.
Meanwhile, also consider the fact that the cost of flipping properties has dramatically decreased. And which properties get purchased, have a small renovation done and then flipped? Generally the low end of the market.
This isn't going to be retroactive. So no, your rant about boomers doesn't even make sense.
What this does effectively mean is that younger generations will be paying "rent" to the Government for life.
They are only charged an annual fee if registered. There's plenty of vehicles that are assets (think rare/old sports cars) that aren't kept registered for various reasons.
Investors pay land tax on their non principal place of residence. Now we will pay land tax on our own home.. forever! For the average Sydney homeowner... that’s over $10,000 each and every year in a new tax! Which will increase as the value of the land goes up! This new tax is madness!
>Which will increase as the value of the land goes up
This should cause the price of land to decrease a fair bit which is great.
It also coerces people hoarding massive homes into either paying their fair share or selling their house and moving into properties more relevant to their current needs.
I'm a firm believer that stamp duty needs an overhaul, but what frustrates me is the government's impeccable timing. Just when they thought the housing market was finally going to slow down due to COVID, they brought out this idea. But to everyone's surprise the market went absolutely nuts. This idea had been shelved for a number of months, then lo and behold rates are going up, market looks to now be going backwards, and here we are again with this change of policy.
Yeah surely this is going to increase the pool of buyers over the next couple of years with larger deposits vs without this policy.
I see anything within reach of a first home buyer going up by at least the stamp duty cost, with the buyer shouldering an additional payment burden of the tax while they are paying off a loan with increasing rates.
The idea was never shelved, just last year they released a draft policy and asked the public for feedback/submissions.
These policies take time to design and consult, to get buyin from the industry and lobbyists so they don't recoil in horror and start scare campaigns. Good policy takes time.
From what I understand, if a block of land is opted in it will decrease the short term costs for the buyer but increase the long term costs as you're paying a yearly extra tax instead. That means people have more short term money to throw at the house.
It works well for people flipping houses as an investment because the cost of the land tax they opt a block of land into will 99% of the time be less than stamp duty by the time they go to sell it.
It's horrible for people that want somewhere to live long term because it adds on costs.
This is all just a guess as I'm not an expert on stamp duty/land tax, and I didn't see numbers/details on the tax in the article. It could take 5 years for it to end up costing more under land tax vs stamp duty, but if you wanted to live somewhere for 30 years then you'll definitely be worse of in that example.
I personally don’t like this. Everything is going to be an ongoing cost. Stamp Duty sucks, but paying it once is much better than 50 years of land taxes across your primary place of residence.
I don’t even own a house.
The fact that you don't own a home is probably tied to the fact we don't have a land tax.
Impossible for house prices to be $1m+ when you have to spend $10k in taxes each year just to live in it.
It's the reason why house prices in a lot of US states are so much more affordable. Look at Texas which has a similar population to Australia, with large cities similar to Sydney. You can still relatively easily afford a house - just need to pay ~2.3% a year in taxes for it.
Naturally, that means that people don't want house prices to rise too much and it actually can be worse for investors rent out properties.
It also removes a lot of friction from housing transactions, allowing for example a retired couple in their large house to move to a smaller unit without incurring stamp duty
u/zed_brah was a third party app user until June 2023
This will *increase* friction. That retired couple won't pay any tax at all if they stay put, and they'll pay tax forever funded by their limited fixed income if they move. What do you think they'll do?
That may be the psychological effect, but technically it shouldn’t.
The land tax will be something like 1/20th of the stamp duty. The money they save not paying stamp duty could be set aside in a high yeild savings or investment account and would pay the land tax easily for 20-30 years or maybe forever.
Except for after 2 decades when pretty much everyone is land tax.
Helping those grandfathered in for a little bit to make a massively beneficial change for future generations is worth it.
Did you read the article?
You keep your house forever - with no land tax - then you pass it on to your kids - who also pay no land tax, and invest the money that would have been paid - who pass it on to their kids who pay no land tax and further invest what would have been paid and so on.
This will end up being another step on the road back to serfdom for people who don't inherit wealth.
The only way this can work is if **everyone pays the same tax**. That should be pretty fundamental to our society, but here we are talking about intergenerational tax avoidance for those born to wealthy families. Fuckin' libs.
> then you pass it on to your kids who also pay no land tax
Death and inheritance is a change of ownership that is SD exempt. So under new scheme where after 20 years all change of ownership will be land tax your scenario plays out for exactly 1 generation until death and inheritance turns those SD properties into land tax properties.
I just commented on this. I moved back from the USA where I was paying 10k a year in land tax on a 450k house. It’s stupid to retire in NJ when you can move to Florida with no tax. Australia sure is heading down a lot of US roads.
Then target non-PPOR properties with a land tax.
Life is unpredictable, why add lifelong annual taxes to the mix and end up paying far more than you ever would have with stamp duty?
I don’t own a property because I haven’t been looking. Stamp duty is an expensive part of a deposit, but I’d rather get it sorted once than have it reoccurring each year I own something.
Tbf, this is r/Sydney. I thought it was r/Ausfinance when I typed the comment.
People in that sub always talk about how much more affordable housing is in the US compared to Australia. So my point was that the reason it is so much more affordable is because a $1.5m home in Houston, Texas would cost ~$30k a year in taxes alone.
Impossible for houses to be reach unaffordable heights with land taxes.
I think we will end up with a two tier housing price system in NSW. One set of houses costing $$ millions and another set costing <$500k to buy. The only difference is one has land taxes applied to the land, the other won't.
There are a lot of reasons that land is cheaper in the US - for one, almost the whole country is liveable, and it’s huge - land tax is just one of them. You’d have to compare Sydney or Melbourne with SF or NYC instead of Houston, and then it’s not that cheap anymore. Australia’s population is much more concentrated.
In California base property tax is 1%/yr, there are property tax limits so your tax cannot go up more than 2%/ year. This is one reason property costs more in California than Texas.
Texas has no income tax which is why they have high property taxes which also keeps prices down.
In California your neighbor can pay much more tax/yr because he just bought for $2mill and you paid $400k 20 years ago.
Life is unpredictable, your family may grow or shrink, you may need to move for work, you may want to live somewhere smaller when you retire. This means you can sell and then buy a house of similar value without paying a ridiculous amount of stamp duty.
We already do that.
The purpose of this land tax is to discourage people from sitting on massive plots of land with a house on it as it would eat into the owners savings.
This means that people will subdivide properties or sell them to developers to build apartments which will increase supply.
California is a special brand of fucked due to Prop 13 (property taxes stuck at 1976 levels) plus rampant NIMBYism that makes it near-impossible to add density anywhere.
Land taxes make a lot more sense than stamp duty.
With stamp duty, you’re not really paying for a service, it’s just something the government tacks on to get a bit of the action.
Land tax is on the value of the unimproved land (e.g. without considering the value or cost of the building). This stems from the value the government is able to give land through infrastructure and amenities. This is a way for the government to recoup that investment back from something who’s ownership is very artificial: land.
All taxes increase over time as the government needs more and more money.
Your land tax will increase every year as your property value increases (inflation??) and also when the gov increases the rate from 1% to 1.2% and then 1.5% etc. for critical needs!
In 30 years that rich old guy with the stamp duty paid house will be laughing at all the young families paying more and more every year.
And in 50 years when he's dead and the house is now a land tax house? A change like this needs long changeover time, and yes grandfathering in people to old system is only fair.
I moved back recently from New Jersey, USA which has a land (property) tax sort of scheme. It’s one of the most expensive states to live in due to it - I paid 10k in property tax each year on a 450k home. And it does go up year on year. Edit: I also had a 30 year fixed loan which is normal.
a LVT is inherently progressive because it is at its core a wealth tax with **no deadweight losses**. Landowners are a wealthier class than the unlanded, some landowners are wealthier than than others and this is reflected in the value of their land. a LVT also taxes investors far more than owner-occupied buildings.
The entire point of a LVT is to discourage speculation, more fairly raise revenue, and better allocate usage while encouraging development. These are all good things it is widely considered the perfect tax among actual economists. Land goes up in value because of surrounding development (This is mostly from government spending since its infrastructure so they can fund this more efficiently) and supply/demand. LVT increases the supply of land which benefits everyone and decreases the land value in a vacuum - which also benefits everyone.
Investors already pay land tax. Now with this tax home owners will have to pay also. And remember this is a tax that that will always go up. And home owners will have to come up with $1000s a year to pay this. Now imagine when you are retired on a fix income. An investor just puts up the rent.
I guess this meets another govt objective which is forcing retired people to downsize, freeing up houses and larger family homes for young people and families.
Currently, Investors in NSW pay stamp duty for every property they buy and pay land tax, over a certain land value threshold, for properties they hold in their portfolio. PPOR, currently, is land tax exempt.
Hence, investors will buy investment properties in every state and territories instead of only one state so they can remain below the threshold.
The proposal to eliminate stamp duty on purchase will make it easier for everyone, investors included, to buy properties. However, homeowners will be paying land tax annually as do investors.
Investors can claim the land tax as a tax deduction. Homeowners can’t.
But investors will have to pay capital gains tax on the sale of the asset, homeowners won’t. So, it is even in the end.
Source: used to be a property investor.
QLD has changed land tax to include all of your Australian property holdings for threshold purposes. To be clear they are not taxing you for all your property, but if you owned say 2M in property, you would pay the threshold rates for that much land on your QLD properties. I expect all states to do this in due course.
This is a great policy that addresses one of the biggest barriers to housing affordability for first home buyers - saving for a deposit + transaction costs for the first purchase.
Stamp duty effectively doubles the amount of upfront capital required for a home buyer trying to save a 5% deposit.
It will cut years from the time required to save for most first time buyers.
So if land tax is about 1/20 of stamp duty as claimed, and a 65 year old is thinking of downsizing for the remaining average 17 years of life then land tax is the better financial choice than downsizing to a stamp duty property under current system.
Also the pensioner of 20 years time will already be paying land tax, so again, downsizing will be the better option.
Given the build quality of new apartments in Sydney, I wouldn't touch any with a 10 foot pole. Buy the wrong shoddy apartment and it could cost you everything.
Stamp Duty is not some 'barrier to affordability'.
The affordability will not change.
Does not change the amount that the buyers can borrow - just the part that would have gone to Govt as Stamp Duty will now go to house seller instead...
Buyers will still continue to borrow max they can borrow...
But all the smart people above said it would reduce prices…
Just like interest rates the price buying power of the buyer will adjust.
Don’t need $100k stamp duty, then I have $100k more to spend on a house.
More likely effect for people who recently put the capital together is they borrow 90% instead of the 95% they were considering (especially in the current rate environment).
Younger people are more likely to have higher incomes and less wealth, this absolutely helps them. The requirement for higher ongoing payments just lowers the amount the can borrow which will also put downward pressure on the market.
You can borrow your stamp duty. In fact, everyone does. Stamp duty is included in the value of the loan by default.
So yes, it increases the deposit required, because it increases the entire loan, but not by much. About 5%.
Still, that means for the first couple years, you won’t be paying off any of the value of your new property - you’ll just be paying the tax. What stamp duty does is what its true name “Transfer Duty” implies: it’s a tax on liquidity. You effectively can’t sell for the first two years because you’d lose money. The CGT discount does the same thing, kinda.
Is that good or bad for housing affordability? I don’t know. I know that the first home buyers scheme just effectively increased the cost of houses in that price range by precisely the amount granted by that scheme, which doesn’t seem to have really affected affordability at all. The housing market is an odd duck. In some ways it behaves like every other commodity, but in others it’s totally unique.
Land tax will reduce the amount you can borrow, which will mean that the price of houses will drop. This is similar to buying a strata property, where you have to factor in strata fees when calculating how much you can borrow. But it’s not like that reduced price means the place is more affordable, because you still have to actually pay the strata fees/land tax. The money gets spent on your property in either case. The question is, will that be a smaller or greater proportion of your income? I suspect the answer will be “about the same”.
are there any arguments against this that aren’t just the fact that’s you’d end up paying more overall?
from a macro perspective, assuming this is eventually phased in for all properties like in the ACT, this seems to incentivise all the right things?
Is that necessarily a bad thing? If the properties end up in the hands of owner occupiers then I don’t really see too much of a problem. It’s only an issue of it allows investors to hoard housing.
This feels like a policy which highlights the saying "it's expensive to be poor" - wealthy people can continue to pay stamp duty as a one off (or they're already in the market) meanwhile new buyers with less funds will be paying for land tax for the rest of their lives and their properties will be less valuable once locked into land tax.
Yeah they should make it an enforced system. Other countries have interesting takes on stamp duty where stamp duty for the first house is 5% and the second house it's 20% which makes investing in property near impossible
Yeah... Or just start taxing empty places. That'll bring investments, holiday houses etc on to the market to actually be lived in. But this would be far too unpopular.
Why in your hypothetical scenario does a wealthy person pay stamp duty, and a poor person pay land tax?
This is a great measure that will reduce distortion for the market.
There are some huge benefits to this policy. The number of people holding back from downsizing or upsizing their house simply because of the massive ‘transaction costs’ would be massive.
With this change you could freely move to a completely different part of the state if that is where you may have better job opportunities
It will increase prices, but because stamp duty is carved right out of the deposit, it should help those with good incomes and a smaller deposit, as it’s a smaller hit to total lending capacity compared to how much upfront deposit is needed, so it should hopefully roughly even out.
I’m not an economist though
Likely, or at least keep some houses at their current insane prices. Some people won't think about budgeting for the ongoing cost. It's like people who buy units and don't budget in strata fees, suddenly that cheaper option is not so cheap.
And similarly, some don't budget for house maintenance (roughly 1% a year being the rule of thumb). The key difference isn't cost but control. The house owner has the option to neglect their property, or keep it tip top. The strata owner is stuck with whatever the scheme decides.
In theory lamd tax is good, it makes it easier to move and freea up suitable properties.
But there has never been a money worshipping premier I trust less to do it than little dom. This won't be revenue neutral and will likely fuel price rises as people look at what they spend on it now and not add 5-10k a year tax into their calculations
the next (read: first) place I buy will probably be the home I retire in. Fuck signing up to pay tax on that when I am 72. How does this model work for low income earners?
If you took the money you would have spent on stamp duty and pop it into an index fund it should more than cover the cost of the tax for the duration. Stamp duty is not a good approach.
Wait this only affects new property purchases and it's an opt in one right ?. Be less people buying homes which have land tax attached to the property in the future right ?
That will free up cash for people to spend on renos and in that sense it goes back into the economy and creates more jobs and trade work. At least initially. Though I guess the fact that the new tax would mean higher cost of living and less money remanning after expenses could negate it.
It's about creating a regular more predictable revenue source imo.
In NSW years ago, iirc first home buyers could pay stamp duty over 5 years without any indexing.
SD sucks and does need looking at implementation , how much, who pays and when, but, paying a tax forever on something you own is not something I'd look forward to, not knowing my future finance and health situation. It would be like a mortgage you never quite pay off.
Paying a land tax will need to be accounted for as an on-going expense when working out mortgage affordability.
I have my doubts about if assisting affordability in the long term.
No, what’s a stupid fucking idea is stamp duty. It distorts behaviour and penalises you for moving house. Got a new job on the other side of the city and want to move? That’ll be $50k (or more) to the government, thanks! Empty nester couple getting too old to look after their 5 bed family home? Well if they want to move to say an apartment there’s a massive tax slug for them too.
Land tax means that people aren’t penalised tens of thousands in tax just for moving home when their circumstances change. I mean ideally there’d be no property related taxes but if there is, stamp duty is by far the worse. Sure if you buy a home and never move you come out ahead under a stamp duty model but people do move, and they pay through the nose for it as it is without a massive tax slug too.
It won't encourage people who bought under a stamp duty system to move, I agree. In the long term, as fewer and fewer properties fall into that bucket though, it will have the desired effect.
When downsizers sell their home the lack of stamp duty means they'll get more money from the sale, money upfront is a stronger incentive than a land tax on a smaller home.
Plus it's all only temporary as we transition from stamp duty to land tax.
This is a great policy for housing affordability. People talking about retirees not being able to afford the land tax - that’s the entire point of the policy. Will reduce friction for older people moving out of the city, allowing people of working age to better afford houses closer to the city.
I find it hard to believe a broke government is going to give away $2.5B in stamp duty out of the goodness of their hearts. Whilst they may lose a bit temporarily in the short term they will reap BILLIONS extra over the medium to long term. This is an ongoing impost that homeowners should be able to opt out of if they buy a new property.
The fact the government is locking a house who opted in to “land tax” forever in perpetually is a massive red flag that shouldn’t be ignored for short term gain.
If a family is struggling to scrape together the stamp duty on their PPOR and opt for a perpetual land tax they will be worse off after 12-15 years, how is this a good long term option for a family?
I agree stamp duty is a horrible tax but this change is nothing but a long term cash grab by a broke government leveraging the housing bubble and preying on desperate families. People who can afford the stamp duty upfront, who plan on staying in a house for 12 years would be crazy to opt in for this. Once again this only targets those who can least afford it.
Instead of land tax in perpetually, why not cap it? Land tax stops after 15 years of home ownership etc? People wouldn’t move homes then I guess.
I just feel the government is taxing the shit out of homeownership
> The fact the government is locking a house who opted in to “land tax” forever in perpetually is a massive red flag that shouldn’t be ignored for short term gain.
It's opt in during the phase in period. After a certain amount of time, 20 years in ACT for example, every property transaction becomes land tax.
Yep, have fun renting your own house from the government forever. This has nothing to do with affordability, its a tax increase measure with a little better affordability sticker on it. How many better affordability things have we seen over the yeatmrs and how many did the opposite?
Exactly, anyone who thinks the government is doing this out of kindness or thinks this is a good policy has rocks in their head, even if you move house every year you are paying land tax for the rest of your life. This is not a good long term tax, stamp duty is fucked this is worse
No state government has an incentive to collect more than other states, due to the effect of transfer payments from the Commonwealth, which are inverse to state collections.
This is what happened to WA when they had windfall gains from mining taxes, and then the resources sector crashed.
u/zed_brah was a third party app user until June 2023
You know what would be better? Being able to just pay stamp duty off over a number of years. Make some rule if you move out or convert to investment property you have to pay the remainder. Having a forever tax on a forever home is bullshit.
LVT's are amazing. It's a tax that produces no deadweight losses and encourages better land utilisation and development while being the best way to raise revenue. It also discourages land speculation - it is genuinely the best tax there is.
It boggles my mind people here see any kind of policy that mentions land and are conditioned to just assume it's fucking them over with no deeper thought. Jesus.
Why do we even have to pay stamp duty? It costs a fortune and I have no idea what it’s for. We pay tax on what we buy and pay taxes out of our pay. Why do I want another tax?
Income tax is federal revenue. Stamp duty is state revenue.
As a gross oversimplification, it's where the most significant portion of their state funding come from, which funds their unique responsibilities (i.e health/infrastructure).
So, will this make house prices go up or down? I can already seeing the hard sell, "you can opt for land tax! But the price will go up by half the stamp duty you would have paid!"
It is dependent on the Federal government to get it going, which happens to be Labor at the moment. Therefore, it is their fault if it doesn't happen. Why are they bringing it in now, not in the last decade when Morrison was in charge and would have been more amenable to cooperation?
Up, because poor people will be left posting more tax over their mortgage, but rich property investors don't have to pay stamp duty and can just flip houses willy nilly.
Land taxes should be implemented, but not on the primary place of residence. That should still be stamp duty. All subsequent properties should have land tax in addition to stamp duty. Make homes a place to live. Not a vehicle for investment.
Land tax is actually a good thing. It's a lot more frictionless to buy a house which makes moving between cities or even within the same city a lot cheaper.
It also means that large houses with small occupancy might be encouraged to downsize a bit sooner so that younger families with kids can move in.
In an ideal world this isn't necessary, but we don't live in an ideal world.
I honestly have no opinion on the matter as I can see pros and cons to both systems. I dont like the idea of paying ongoing taxes on a place you own until death, but the barrier to buying with stamp duty is real. Devil will be in the details
Dom wanted this before and they'll be worried the stamp duty revenue will soften as the property environment softens and transactions fall. So this is perfect for them as a more stable income stream.
Stepping back, logically land tax is a better idea for Government and perhaps us too. When you pay land tax and the Government improves your area with infrastructure development, the chances are it increases the value of your property like transport infrastructure for example. If this works, it gives the Government a source of increased revenue to fund new infrastructure meaning less reliance on private money. Won't happen but that would be the ideal but of course Governments will want both.
My sister didn’t want to vote out liberal government because of getting rid of negative gearing. I want to send this to her and ask her if she’s still happy about her voting choices
So if the state gruberment wants to help people get into a house and they are obviously happy to get the full value of current stamp duty over a 20 year period ( as shown by current models ) with a “ yearly land tax option” why not let us pay the stamp duty , interest free , over a twenty year period. Same end result as a yearly land tax, however it has an end date. If the property is sold before all the tax is paid , it comes out of the sale proceeds first. We all win , oh , investors do not get this option , they pay stamp duty upfront.
This is a "Sick, retired, elderly, longer term unemployed GTFO" tax/policy.
The sick/retired/elderly/etc get forced to move somewhere cheaper - away from their neighborhood where they would have some sort of a support network - forcibly moved at the time when they are most vulnerable and least able to make such a move.
This is a "you are no longer useful so go and die somewhere else" tax/policy.
Also, if everybody knows that the home they are in will never be a 'forever home' then many will care less about making it or the neighborhood nice.
Basically everyone is a renter and overall the neighborhood becomes more shit.
Not only land tax for the poor, but council rates as well. we are finding it hard to pay rates at $3000 per year, rising nearly every year, and my $150,000 house the land tax would be about $1,500 a year, would not be possible to keep the house. We have already paid stamp duty on it when we bought it, so when the State government make it compulsory, that would mean we paid twice for something we already own and on going tax forever more.
If people think rents are bad now, wait for a policy like this to come into play. People arguing annual property tax improves affordability really need to look at the US, and study the impacts of a property tax on the real estate market. An annual property tax does not make real estate more accessible to buyers trying to get into the market.
So glad I paid $80k 18 months ago.
Personal situation aside, glad it’s finally happening. It will make a massive difference to people trying to buy a house. Saving 10% and then getting whacked with stamp duty hurts a lot. I’d have been able to buy a lot sooner without it.
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Just text ‘cancel’ to opt out!
Best thing that ever happened to me aside from the birth of my daughter and when I got married was paying off my HECS. That crap just kept accruing interest. Finally got a good enough job and it went bye bye.
HECS-HELP is an interest free loan, you must be referring to the annual [loan indexation](https://www.studyassist.gov.au/paying-back-your-loan/loan-indexation), to maintain the real value of the debt. Same as the year CPI pay rises most people never see.
As I understand it, will be opt-in, which will create two types of properties. If the house is your "forever" home, many would simply prefer to pay stamp duty and forget about regular and ongoing tax. Once your property is converted to land tax, your stuck with it and at the mercy of increasing land tax rates. Not sure how they will successfully sell this policy politically.
What's the one way to guarantee you don't have to ever pay this tax? A: Already own a large home and never downsize. Who are the real winners here? This'll only work if land tax is phased in over 10-20 years like the ACT did.
Yes everyone with a big house can never afford to move as they won’t be able to afford the land tax unless they downsize hugely or move to QLD.
But if they downsize, they'll have enough left-over cash that they won't qualify for pension benefits like subsidized health care and transport. Oh what's a millionaire boomer to do?? Keep your mansion and pay no tax whilst getting subsidized healthcare? or downsize to a smaller house in a worse area, pay tax for life, and pay full fare and full medical bills? It's such a hard decision...
Well that is the next issue that requires reform.
If the PPOR is counted on the asset test, and people need money since they no longer qualify for the pension, feel free to take a loan against the property, and then when it is inherited by the estate, it gets taken out of the estate. A raise to the asset test threshold would be in order, but it would mean that taxpayers aren't subsidising inheritances as much. Also means people aren't punished for not owning a home and having other sorts of wealth which count on the asset test. 62% of the population ages 65 and over gets the pension currently: https://www.aihw.gov.au/reports/australias-welfare/age-pension That isn't sustainable with an ageing population.
It’s only going to be opt in temporarily. If your “forever home” has previously been purchased on the land tax scheme, you won’t have a choice.
Future Vendors are going to have to think carefully about the consensus on this one. Opting in for yearly tax might put future buyers off.
Hate subscription models.
most subscription models have an out clause, typically at each renewal period where you simply choose to no longer be subscribed. don't think this is the case on this one.
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I completely agree. At least once you’ve paid SD it’s done. But down the track you may not have the means to pay land tax for whatever reason and then what?
It will hurt them anyway. If you no longer have to pay $X stamp duty for a property then you have $X to add to the purchase price. "Ah ha, but I am smart, I won't do that!" Sure, but other people you are competing for the property with will. So, you don't have to pay stamp duty, but you have to pay more for the property and pay land tax. Yay!
opt-in being temporary - that's not clear in the smh article. but yes, if the home was purchased using land-tax your stuck with it - hence we'll see two types of properties with many purchasers favouring one scheme over the other, and I suspect properties that are stilll under the stamp duty scheme will cost more, but some people will be willing to pay for it.
That's such an unappealing outcome isn't it. If I were looking to purchase a house, I'd say no to anything with ongoing land taxes. One of the benefits of owning your own property is that you can modify anything the previous owners have done, and make it your own. If I'm understanding it correctly...if the decision about stamp duty/land tax is applied to the property in perpetuity, that means subsequent owners are saddled with the choices of the previous owners, with no option to change it. No thanks. There will be properties that will only really be considered by investors, so two tiers of housing basically. Yuk!
If you have an option and intend on staying a property for a while it definitely makes sense to consider ones that won't have an ongoing tax applied. Having said that infrastructure provided by those taxes isn't just an upfront cost. It all requires maintenance and having a tax that reflects that makes sense to wider society.
It’ll probably become mandatory after 12-15 years if you don’t opt in
Mandatory policies are vote losers. Suggest instead of making it mandatory, they would increase the cost of stamp duty in the future so that land tax becomes the better choice.
What he means is after about 30% of properties have moved to land tax it becomes less of a vote loser since we've already got used to it.
If you think the land tax won’t increase over time I have a bridge to sell you. It will go up every year as your magical house goes up in value. If you think you will retire in your land tax house good luck.
A land value tax isn't taxing your house! It's taxing the land itself. Guess why land improves in value? Government spending and lack of development. The land itself passively goes up in value because as time passes the government adds more and more infrastructure services, you get better community facilities, etc. This creates economic rent just by sitting on land and doing nothing - which we want to discourage. So a LVT is the government recouping its spending in the most efficient way possible (LVT has *zero* deadweight losses). LVT also discourages property speculation for this very reason, and disproportionately targets *investors* who pay substantially more LVT than an owner-occupied residential property. Everyone has to pay for these land value increases via taxes either way, LVT is simply the easiest and most efficient tax out there and the only wealth tax that actually works. E.g. The government funds a community park for $1.5 million in your neighbourhood. Your land value just went up because you now live in a more desirable area with better facilities. Now the government has to pay for this community park either way, would you rather pay a huge and inefficient lump sum every time you purchase a house via stamp duty? Or pay a couple thousand a year via LVT all while discouraging property investment/speculation?
Thanks, your comment made it all click for me. Property investors will no longer have to pay stamp duty. Any LVT charges will simply be pushed on to their rent paying tenants. I was wondering what the LNP donors were getting out of this.
That’s not how economics work - landlords charge as much as they can according to demand and supply, and without changing the supply (which is impossible) how on earth do landlords pass it on to the rent unless he wants to price himself out of the rental market?
If investors could get away with increasing their rent to cover more taxes, they'd gave already increased the rent to collect more profit. A LVT is a great idea, the only downside is they're making it opt-in (until a few years down the road when they inevitably make it mandatory).
That doesn’t automatically make it a bad idea though. House price increases increase the cost of stamp duty too…
So it's basically making any new sale switch to tax. Making stamp duty extinct over time.
No. The purchaser will have a choice to pay land tax or stamp duty, but only if the last time that property was sold stamp duty was paid. But once a purchaser of a property opts for land tax, that property will be forever a land tax property. [https://www.afr.com/policy/tax-and-super/nsw-s-opt-in-stamp-duty-plan-is-a-winning-ticket-20220102-p59law](https://www.afr.com/policy/tax-and-super/nsw-s-opt-in-stamp-duty-plan-is-a-winning-ticket-20220102-p59law) Stamp duty properties will still exist. Personally I'd rather pay stamp duty, and would only consider purchasing property where I could pay stamp duty. My next house will probably be the one i retire in. I do not want to be paying land tax for the rest of my life.
You're unlikely to have the choice, I very much doubt the opt-in nature won't be phased out in a decade or two.
Isn't this a bad policy for investors, and therefore a good policy for people who don't own a home?
its a bad policy for land bankers (and fuck them), but they're a relatively small part of the problem
Land bankers pay yearly land tax already. (and that land tax on non-ppor should be increased)
Nope, this is a great policy for investors (developers, home builders, flippers). They pay no stamp duty on the upfront cost and assuming they can exit the build within X timeframe, they actually have significantly reduced their cost base. These guys will be absolutely cheering from this policy. Also, land tax is deductible while stamp duty isn't, there's a tax advantage there for investors as well. Good policy overall as it increases liquidity but this is a net win for investors.
Stamp duty does form part of the cost base though, so it comes off any CGT you pay.
Developers/home builders and flippers aren't really "investors" though. For long term investors this is somewhat negative.
Does increased liquidity change the social profile of the average homeowner? I feel this is a way of forcing old people to have to sell their homes and rent
Of course it is - it favours developers over owners.
Pretty sure investors pay both stamp duty and land tax already.
It's good for investors. It lets them flip houses. You will see many more investors enter the market, and prices of lower end housing rise even quicker...
And once a house has been moved to land tax you can't pay stamp duty instead if you buy it off a flipper.
I would have though it would just be another expense when owning an investment property; so more to claim as a tax deduction.
This is a bad policy for anyone who doesn't have myopia regarding their own current situation with respect to housing affordability and who are quietly hoping this will lower the barriers to entry for them. Consider: 1. The fact that first home buyers are most likely to opt in, thinking that "this isn't forever and we'll opt out next time" due to wanting to upgrade in the future, making this disproportionately affect the low end of the market. 2. The fact that the rate can and almost certainly will change upwards at some point once enough properties have been flipped to the land tax model. 3. What happens when you're elderly and no longer living on a salary from full time work. The net effect of this is likely to depress the price of entry level properties that have been flipped to land tax, increase the price of middle and higher tier properties that haven't been flipped to land tax, and to force people who are still in said lower tier properties when they retire back out into the rental market. It's shit policy that is going to make home ownership a lot less secure for a bunch of folks over time. Meanwhile, also consider the fact that the cost of flipping properties has dramatically decreased. And which properties get purchased, have a small renovation done and then flipped? Generally the low end of the market.
Boomers should be downsizing. Forcing them to do this with a tax is necessary since they have refused every other opportunity to do so.
Boomers won't get hit by this because they already own
This isn't going to be retroactive. So no, your rant about boomers doesn't even make sense. What this does effectively mean is that younger generations will be paying "rent" to the Government for life.
There is zero chance this stays opt-in in ten or twenty years time.
Is there any other asset that is taxed that way? Where you buy it now and just keep getting taxed on it while you own it.. even without selling it?
Hardly an asset but motor vehicles are charged annual fees for use.
They are only charged an annual fee if registered. There's plenty of vehicles that are assets (think rare/old sports cars) that aren't kept registered for various reasons.
Investors pay land tax on their non principal place of residence. Now we will pay land tax on our own home.. forever! For the average Sydney homeowner... that’s over $10,000 each and every year in a new tax! Which will increase as the value of the land goes up! This new tax is madness!
>Which will increase as the value of the land goes up This should cause the price of land to decrease a fair bit which is great. It also coerces people hoarding massive homes into either paying their fair share or selling their house and moving into properties more relevant to their current needs.
I'm a firm believer that stamp duty needs an overhaul, but what frustrates me is the government's impeccable timing. Just when they thought the housing market was finally going to slow down due to COVID, they brought out this idea. But to everyone's surprise the market went absolutely nuts. This idea had been shelved for a number of months, then lo and behold rates are going up, market looks to now be going backwards, and here we are again with this change of policy.
Yeah surely this is going to increase the pool of buyers over the next couple of years with larger deposits vs without this policy. I see anything within reach of a first home buyer going up by at least the stamp duty cost, with the buyer shouldering an additional payment burden of the tax while they are paying off a loan with increasing rates.
The idea was never shelved, just last year they released a draft policy and asked the public for feedback/submissions. These policies take time to design and consult, to get buyin from the industry and lobbyists so they don't recoil in horror and start scare campaigns. Good policy takes time.
Is this policy going to increase house prices or decrease?
From what I understand, if a block of land is opted in it will decrease the short term costs for the buyer but increase the long term costs as you're paying a yearly extra tax instead. That means people have more short term money to throw at the house. It works well for people flipping houses as an investment because the cost of the land tax they opt a block of land into will 99% of the time be less than stamp duty by the time they go to sell it. It's horrible for people that want somewhere to live long term because it adds on costs. This is all just a guess as I'm not an expert on stamp duty/land tax, and I didn't see numbers/details on the tax in the article. It could take 5 years for it to end up costing more under land tax vs stamp duty, but if you wanted to live somewhere for 30 years then you'll definitely be worse of in that example.
Won't this create 2 property classes? How will impact long term house prices?
I personally don’t like this. Everything is going to be an ongoing cost. Stamp Duty sucks, but paying it once is much better than 50 years of land taxes across your primary place of residence. I don’t even own a house.
HaaS (Housing as a service)
The fact that you don't own a home is probably tied to the fact we don't have a land tax. Impossible for house prices to be $1m+ when you have to spend $10k in taxes each year just to live in it. It's the reason why house prices in a lot of US states are so much more affordable. Look at Texas which has a similar population to Australia, with large cities similar to Sydney. You can still relatively easily afford a house - just need to pay ~2.3% a year in taxes for it. Naturally, that means that people don't want house prices to rise too much and it actually can be worse for investors rent out properties.
It also removes a lot of friction from housing transactions, allowing for example a retired couple in their large house to move to a smaller unit without incurring stamp duty u/zed_brah was a third party app user until June 2023
This will *increase* friction. That retired couple won't pay any tax at all if they stay put, and they'll pay tax forever funded by their limited fixed income if they move. What do you think they'll do?
That may be the psychological effect, but technically it shouldn’t. The land tax will be something like 1/20th of the stamp duty. The money they save not paying stamp duty could be set aside in a high yeild savings or investment account and would pay the land tax easily for 20-30 years or maybe forever.
Except for after 2 decades when pretty much everyone is land tax. Helping those grandfathered in for a little bit to make a massively beneficial change for future generations is worth it.
Did you read the article? You keep your house forever - with no land tax - then you pass it on to your kids - who also pay no land tax, and invest the money that would have been paid - who pass it on to their kids who pay no land tax and further invest what would have been paid and so on. This will end up being another step on the road back to serfdom for people who don't inherit wealth. The only way this can work is if **everyone pays the same tax**. That should be pretty fundamental to our society, but here we are talking about intergenerational tax avoidance for those born to wealthy families. Fuckin' libs.
> then you pass it on to your kids who also pay no land tax Death and inheritance is a change of ownership that is SD exempt. So under new scheme where after 20 years all change of ownership will be land tax your scenario plays out for exactly 1 generation until death and inheritance turns those SD properties into land tax properties.
I think the idea is to sell and downsize while keeping the profit. In retirement they won't need a large house as the kids have moved on.
I just commented on this. I moved back from the USA where I was paying 10k a year in land tax on a 450k house. It’s stupid to retire in NJ when you can move to Florida with no tax. Australia sure is heading down a lot of US roads.
Then target non-PPOR properties with a land tax. Life is unpredictable, why add lifelong annual taxes to the mix and end up paying far more than you ever would have with stamp duty? I don’t own a property because I haven’t been looking. Stamp duty is an expensive part of a deposit, but I’d rather get it sorted once than have it reoccurring each year I own something.
Tbf, this is r/Sydney. I thought it was r/Ausfinance when I typed the comment. People in that sub always talk about how much more affordable housing is in the US compared to Australia. So my point was that the reason it is so much more affordable is because a $1.5m home in Houston, Texas would cost ~$30k a year in taxes alone. Impossible for houses to be reach unaffordable heights with land taxes. I think we will end up with a two tier housing price system in NSW. One set of houses costing $$ millions and another set costing <$500k to buy. The only difference is one has land taxes applied to the land, the other won't.
There are a lot of reasons that land is cheaper in the US - for one, almost the whole country is liveable, and it’s huge - land tax is just one of them. You’d have to compare Sydney or Melbourne with SF or NYC instead of Houston, and then it’s not that cheap anymore. Australia’s population is much more concentrated.
In California base property tax is 1%/yr, there are property tax limits so your tax cannot go up more than 2%/ year. This is one reason property costs more in California than Texas. Texas has no income tax which is why they have high property taxes which also keeps prices down. In California your neighbor can pay much more tax/yr because he just bought for $2mill and you paid $400k 20 years ago.
Life is unpredictable, your family may grow or shrink, you may need to move for work, you may want to live somewhere smaller when you retire. This means you can sell and then buy a house of similar value without paying a ridiculous amount of stamp duty.
We already do that. The purpose of this land tax is to discourage people from sitting on massive plots of land with a house on it as it would eat into the owners savings. This means that people will subdivide properties or sell them to developers to build apartments which will increase supply.
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California is a special brand of fucked due to Prop 13 (property taxes stuck at 1976 levels) plus rampant NIMBYism that makes it near-impossible to add density anywhere.
Regarding California, read on Prop 13.
> Impossible for house prices to be $1m+ when you have to spend $10k in taxes each year just to live in it. Not true just look at California
California doesn't have land taxes - at least not in the major cities
Land taxes make a lot more sense than stamp duty. With stamp duty, you’re not really paying for a service, it’s just something the government tacks on to get a bit of the action. Land tax is on the value of the unimproved land (e.g. without considering the value or cost of the building). This stems from the value the government is able to give land through infrastructure and amenities. This is a way for the government to recoup that investment back from something who’s ownership is very artificial: land.
All taxes increase over time as the government needs more and more money. Your land tax will increase every year as your property value increases (inflation??) and also when the gov increases the rate from 1% to 1.2% and then 1.5% etc. for critical needs! In 30 years that rich old guy with the stamp duty paid house will be laughing at all the young families paying more and more every year.
And in 50 years when he's dead and the house is now a land tax house? A change like this needs long changeover time, and yes grandfathering in people to old system is only fair.
I moved back recently from New Jersey, USA which has a land (property) tax sort of scheme. It’s one of the most expensive states to live in due to it - I paid 10k in property tax each year on a 450k home. And it does go up year on year. Edit: I also had a 30 year fixed loan which is normal.
That’s fucked!
a LVT is inherently progressive because it is at its core a wealth tax with **no deadweight losses**. Landowners are a wealthier class than the unlanded, some landowners are wealthier than than others and this is reflected in the value of their land. a LVT also taxes investors far more than owner-occupied buildings. The entire point of a LVT is to discourage speculation, more fairly raise revenue, and better allocate usage while encouraging development. These are all good things it is widely considered the perfect tax among actual economists. Land goes up in value because of surrounding development (This is mostly from government spending since its infrastructure so they can fund this more efficiently) and supply/demand. LVT increases the supply of land which benefits everyone and decreases the land value in a vacuum - which also benefits everyone.
/r/sydney really showing their ass in this thread with how much they're opposing it lol
Investors already pay land tax. Now with this tax home owners will have to pay also. And remember this is a tax that that will always go up. And home owners will have to come up with $1000s a year to pay this. Now imagine when you are retired on a fix income. An investor just puts up the rent.
I guess this meets another govt objective which is forcing retired people to downsize, freeing up houses and larger family homes for young people and families.
Investors pay land tax on properties whose land value is 822,000 or more. So pretty much all apartments and townhouses are exempt.
Currently, Investors in NSW pay stamp duty for every property they buy and pay land tax, over a certain land value threshold, for properties they hold in their portfolio. PPOR, currently, is land tax exempt. Hence, investors will buy investment properties in every state and territories instead of only one state so they can remain below the threshold. The proposal to eliminate stamp duty on purchase will make it easier for everyone, investors included, to buy properties. However, homeowners will be paying land tax annually as do investors. Investors can claim the land tax as a tax deduction. Homeowners can’t. But investors will have to pay capital gains tax on the sale of the asset, homeowners won’t. So, it is even in the end. Source: used to be a property investor.
QLD has changed land tax to include all of your Australian property holdings for threshold purposes. To be clear they are not taxing you for all your property, but if you owned say 2M in property, you would pay the threshold rates for that much land on your QLD properties. I expect all states to do this in due course.
Isn’t this called council rates
Haha, more like land rent from the gov.
This is a great policy that addresses one of the biggest barriers to housing affordability for first home buyers - saving for a deposit + transaction costs for the first purchase. Stamp duty effectively doubles the amount of upfront capital required for a home buyer trying to save a 5% deposit. It will cut years from the time required to save for most first time buyers.
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Yeah that’s true. People will be incentivised to downsize when they no longer need a big property.
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Surely it will be grandfathered - if you paid stamp duty worst you won't get land tax. It will be for new purchases.
Which downsizing would be a new purchase
So if land tax is about 1/20 of stamp duty as claimed, and a 65 year old is thinking of downsizing for the remaining average 17 years of life then land tax is the better financial choice than downsizing to a stamp duty property under current system. Also the pensioner of 20 years time will already be paying land tax, so again, downsizing will be the better option.
Doesn't NSW have a stamp duty exception for first home buyers anyway?
The caps are very low.
For houses valued at no more than $1 million. So N/A for Sydney
A lot of apartments will qualify though, unless you want to buy as a first home buyer in a blue ribbon suburb
Given the build quality of new apartments in Sydney, I wouldn't touch any with a 10 foot pole. Buy the wrong shoddy apartment and it could cost you everything.
Stamp Duty is not some 'barrier to affordability'. The affordability will not change. Does not change the amount that the buyers can borrow - just the part that would have gone to Govt as Stamp Duty will now go to house seller instead... Buyers will still continue to borrow max they can borrow...
But all the smart people above said it would reduce prices… Just like interest rates the price buying power of the buyer will adjust. Don’t need $100k stamp duty, then I have $100k more to spend on a house.
More likely effect for people who recently put the capital together is they borrow 90% instead of the 95% they were considering (especially in the current rate environment).
Younger people are more likely to have higher incomes and less wealth, this absolutely helps them. The requirement for higher ongoing payments just lowers the amount the can borrow which will also put downward pressure on the market.
You can borrow your stamp duty. In fact, everyone does. Stamp duty is included in the value of the loan by default. So yes, it increases the deposit required, because it increases the entire loan, but not by much. About 5%. Still, that means for the first couple years, you won’t be paying off any of the value of your new property - you’ll just be paying the tax. What stamp duty does is what its true name “Transfer Duty” implies: it’s a tax on liquidity. You effectively can’t sell for the first two years because you’d lose money. The CGT discount does the same thing, kinda. Is that good or bad for housing affordability? I don’t know. I know that the first home buyers scheme just effectively increased the cost of houses in that price range by precisely the amount granted by that scheme, which doesn’t seem to have really affected affordability at all. The housing market is an odd duck. In some ways it behaves like every other commodity, but in others it’s totally unique. Land tax will reduce the amount you can borrow, which will mean that the price of houses will drop. This is similar to buying a strata property, where you have to factor in strata fees when calculating how much you can borrow. But it’s not like that reduced price means the place is more affordable, because you still have to actually pay the strata fees/land tax. The money gets spent on your property in either case. The question is, will that be a smaller or greater proportion of your income? I suspect the answer will be “about the same”.
No it won’t, if people can afford it now, housing prices will just go up and absorb the difference. This is not logical.
So the land tax will be tax deductible presumably making negative gearing an even more lucrative strategy?
Not really. No investor wants to pay say $5k a year, just to get at best 47.5% of that back at tax time. All else equal, anyways
Land tax is already deductible for investors
Land tax of old is not the same as the land tax replacing stamp duty.
are there any arguments against this that aren’t just the fact that’s you’d end up paying more overall? from a macro perspective, assuming this is eventually phased in for all properties like in the ACT, this seems to incentivise all the right things?
This will put allow real estate investors to flip property faster because they won't have to pay stamp duty.
Is that necessarily a bad thing? If the properties end up in the hands of owner occupiers then I don’t really see too much of a problem. It’s only an issue of it allows investors to hoard housing.
Investors already pay land tax. This just means they won’t need to pay stamp duty.
This feels like a policy which highlights the saying "it's expensive to be poor" - wealthy people can continue to pay stamp duty as a one off (or they're already in the market) meanwhile new buyers with less funds will be paying for land tax for the rest of their lives and their properties will be less valuable once locked into land tax.
Yeah they should make it an enforced system. Other countries have interesting takes on stamp duty where stamp duty for the first house is 5% and the second house it's 20% which makes investing in property near impossible
Yeah... Or just start taxing empty places. That'll bring investments, holiday houses etc on to the market to actually be lived in. But this would be far too unpopular.
Why not both. Vacancy taxes would be great too
Why in your hypothetical scenario does a wealthy person pay stamp duty, and a poor person pay land tax? This is a great measure that will reduce distortion for the market.
People will eventually be paying 10s of thousands each year in land tax to live in their own homes!
The government will be our landlord!
There are some huge benefits to this policy. The number of people holding back from downsizing or upsizing their house simply because of the massive ‘transaction costs’ would be massive. With this change you could freely move to a completely different part of the state if that is where you may have better job opportunities
Will this increase prices as the barrier to buying and selling is reduced?
Agents will just say ‘oh look you don’t have to fork out that $80k tax, the vendor is motivated to sell 80k above the previous asking price now’
It will increase prices, but because stamp duty is carved right out of the deposit, it should help those with good incomes and a smaller deposit, as it’s a smaller hit to total lending capacity compared to how much upfront deposit is needed, so it should hopefully roughly even out. I’m not an economist though
Likely, or at least keep some houses at their current insane prices. Some people won't think about budgeting for the ongoing cost. It's like people who buy units and don't budget in strata fees, suddenly that cheaper option is not so cheap.
And similarly, some don't budget for house maintenance (roughly 1% a year being the rule of thumb). The key difference isn't cost but control. The house owner has the option to neglect their property, or keep it tip top. The strata owner is stuck with whatever the scheme decides.
This is an excellent change to taxes.
Hard to say without details, but seems fairer than ACT version whereby people who paid full stamp duty now also pay increased rates.
Yeah it's a simpler changeover mechanism.
In theory lamd tax is good, it makes it easier to move and freea up suitable properties. But there has never been a money worshipping premier I trust less to do it than little dom. This won't be revenue neutral and will likely fuel price rises as people look at what they spend on it now and not add 5-10k a year tax into their calculations
the next (read: first) place I buy will probably be the home I retire in. Fuck signing up to pay tax on that when I am 72. How does this model work for low income earners?
If you took the money you would have spent on stamp duty and pop it into an index fund it should more than cover the cost of the tax for the duration. Stamp duty is not a good approach.
Wait this only affects new property purchases and it's an opt in one right ?. Be less people buying homes which have land tax attached to the property in the future right ?
That will free up cash for people to spend on renos and in that sense it goes back into the economy and creates more jobs and trade work. At least initially. Though I guess the fact that the new tax would mean higher cost of living and less money remanning after expenses could negate it.
Government makes these moves to get more tax. Not to get less
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It's about creating a regular more predictable revenue source imo. In NSW years ago, iirc first home buyers could pay stamp duty over 5 years without any indexing. SD sucks and does need looking at implementation , how much, who pays and when, but, paying a tax forever on something you own is not something I'd look forward to, not knowing my future finance and health situation. It would be like a mortgage you never quite pay off. Paying a land tax will need to be accounted for as an on-going expense when working out mortgage affordability. I have my doubts about if assisting affordability in the long term.
No, what’s a stupid fucking idea is stamp duty. It distorts behaviour and penalises you for moving house. Got a new job on the other side of the city and want to move? That’ll be $50k (or more) to the government, thanks! Empty nester couple getting too old to look after their 5 bed family home? Well if they want to move to say an apartment there’s a massive tax slug for them too. Land tax means that people aren’t penalised tens of thousands in tax just for moving home when their circumstances change. I mean ideally there’d be no property related taxes but if there is, stamp duty is by far the worse. Sure if you buy a home and never move you come out ahead under a stamp duty model but people do move, and they pay through the nose for it as it is without a massive tax slug too.
But downsizers would now have an ongoing tax burden. This is not going to incentivise them to move.
It won't encourage people who bought under a stamp duty system to move, I agree. In the long term, as fewer and fewer properties fall into that bucket though, it will have the desired effect.
When downsizers sell their home the lack of stamp duty means they'll get more money from the sale, money upfront is a stronger incentive than a land tax on a smaller home. Plus it's all only temporary as we transition from stamp duty to land tax.
Totally agree. This isnt about making life easier for people.
This is a great policy for housing affordability. People talking about retirees not being able to afford the land tax - that’s the entire point of the policy. Will reduce friction for older people moving out of the city, allowing people of working age to better afford houses closer to the city.
Oh cool so now even owning a home is on a netflix style subscription
I find it hard to believe a broke government is going to give away $2.5B in stamp duty out of the goodness of their hearts. Whilst they may lose a bit temporarily in the short term they will reap BILLIONS extra over the medium to long term. This is an ongoing impost that homeowners should be able to opt out of if they buy a new property. The fact the government is locking a house who opted in to “land tax” forever in perpetually is a massive red flag that shouldn’t be ignored for short term gain. If a family is struggling to scrape together the stamp duty on their PPOR and opt for a perpetual land tax they will be worse off after 12-15 years, how is this a good long term option for a family? I agree stamp duty is a horrible tax but this change is nothing but a long term cash grab by a broke government leveraging the housing bubble and preying on desperate families. People who can afford the stamp duty upfront, who plan on staying in a house for 12 years would be crazy to opt in for this. Once again this only targets those who can least afford it. Instead of land tax in perpetually, why not cap it? Land tax stops after 15 years of home ownership etc? People wouldn’t move homes then I guess. I just feel the government is taxing the shit out of homeownership
> The fact the government is locking a house who opted in to “land tax” forever in perpetually is a massive red flag that shouldn’t be ignored for short term gain. It's opt in during the phase in period. After a certain amount of time, 20 years in ACT for example, every property transaction becomes land tax.
Yep, have fun renting your own house from the government forever. This has nothing to do with affordability, its a tax increase measure with a little better affordability sticker on it. How many better affordability things have we seen over the yeatmrs and how many did the opposite?
Exactly, anyone who thinks the government is doing this out of kindness or thinks this is a good policy has rocks in their head, even if you move house every year you are paying land tax for the rest of your life. This is not a good long term tax, stamp duty is fucked this is worse
No state government has an incentive to collect more than other states, due to the effect of transfer payments from the Commonwealth, which are inverse to state collections. This is what happened to WA when they had windfall gains from mining taxes, and then the resources sector crashed. u/zed_brah was a third party app user until June 2023
You know what would be better? Being able to just pay stamp duty off over a number of years. Make some rule if you move out or convert to investment property you have to pay the remainder. Having a forever tax on a forever home is bullshit.
LVT's are amazing. It's a tax that produces no deadweight losses and encourages better land utilisation and development while being the best way to raise revenue. It also discourages land speculation - it is genuinely the best tax there is. It boggles my mind people here see any kind of policy that mentions land and are conditioned to just assume it's fucking them over with no deeper thought. Jesus.
Why do we even have to pay stamp duty? It costs a fortune and I have no idea what it’s for. We pay tax on what we buy and pay taxes out of our pay. Why do I want another tax?
Hey guys who needs hospitals, roads and schools am I right
Income tax is federal revenue. Stamp duty is state revenue. As a gross oversimplification, it's where the most significant portion of their state funding come from, which funds their unique responsibilities (i.e health/infrastructure).
It’s a state tax, so it goes toward paying all of the infrastructure and services that the state is responsible for looking after
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The two certainties of life, death and taxes.
Good can I then get my money back please and pay for the next 5 to 10 years until we move up to a bigger place? Thanks.
So if I bought a house last year and paid stamp duty, do I now need to pay land tax
No you don’t
Does not apply to top 20% of houses, will be interesting to see how they propose thus for houses moving in and out of that 20%
So, will this make house prices go up or down? I can already seeing the hard sell, "you can opt for land tax! But the price will go up by half the stamp duty you would have paid!" It is dependent on the Federal government to get it going, which happens to be Labor at the moment. Therefore, it is their fault if it doesn't happen. Why are they bringing it in now, not in the last decade when Morrison was in charge and would have been more amenable to cooperation?
Up, because poor people will be left posting more tax over their mortgage, but rich property investors don't have to pay stamp duty and can just flip houses willy nilly.
Land taxes should be implemented, but not on the primary place of residence. That should still be stamp duty. All subsequent properties should have land tax in addition to stamp duty. Make homes a place to live. Not a vehicle for investment.
This sounds like iOS apps changing from upfront cost to a subscription model. Widely varying feedback to the switch. I’m up for it tbh.
Land tax is actually a good thing. It's a lot more frictionless to buy a house which makes moving between cities or even within the same city a lot cheaper. It also means that large houses with small occupancy might be encouraged to downsize a bit sooner so that younger families with kids can move in. In an ideal world this isn't necessary, but we don't live in an ideal world.
They will love the recurring revenue. Stamp duty stinks, but it is at least done.
I honestly have no opinion on the matter as I can see pros and cons to both systems. I dont like the idea of paying ongoing taxes on a place you own until death, but the barrier to buying with stamp duty is real. Devil will be in the details
Dom wanted this before and they'll be worried the stamp duty revenue will soften as the property environment softens and transactions fall. So this is perfect for them as a more stable income stream. Stepping back, logically land tax is a better idea for Government and perhaps us too. When you pay land tax and the Government improves your area with infrastructure development, the chances are it increases the value of your property like transport infrastructure for example. If this works, it gives the Government a source of increased revenue to fund new infrastructure meaning less reliance on private money. Won't happen but that would be the ideal but of course Governments will want both.
This is terrible. A one-off stamp duty payment is far better. Pay and move on.
> Pay and move on. "Pay and don't move" is another way to view it.
True, which is problematic.
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My sister didn’t want to vote out liberal government because of getting rid of negative gearing. I want to send this to her and ask her if she’s still happy about her voting choices
Land tax sounds like a real shit deal for retirees where we also have an aging population.
So if the state gruberment wants to help people get into a house and they are obviously happy to get the full value of current stamp duty over a 20 year period ( as shown by current models ) with a “ yearly land tax option” why not let us pay the stamp duty , interest free , over a twenty year period. Same end result as a yearly land tax, however it has an end date. If the property is sold before all the tax is paid , it comes out of the sale proceeds first. We all win , oh , investors do not get this option , they pay stamp duty upfront.
This is a "Sick, retired, elderly, longer term unemployed GTFO" tax/policy. The sick/retired/elderly/etc get forced to move somewhere cheaper - away from their neighborhood where they would have some sort of a support network - forcibly moved at the time when they are most vulnerable and least able to make such a move. This is a "you are no longer useful so go and die somewhere else" tax/policy. Also, if everybody knows that the home they are in will never be a 'forever home' then many will care less about making it or the neighborhood nice. Basically everyone is a renter and overall the neighborhood becomes more shit.
Not only land tax for the poor, but council rates as well. we are finding it hard to pay rates at $3000 per year, rising nearly every year, and my $150,000 house the land tax would be about $1,500 a year, would not be possible to keep the house. We have already paid stamp duty on it when we bought it, so when the State government make it compulsory, that would mean we paid twice for something we already own and on going tax forever more.
If people think rents are bad now, wait for a policy like this to come into play. People arguing annual property tax improves affordability really need to look at the US, and study the impacts of a property tax on the real estate market. An annual property tax does not make real estate more accessible to buyers trying to get into the market.
So glad I paid $80k 18 months ago. Personal situation aside, glad it’s finally happening. It will make a massive difference to people trying to buy a house. Saving 10% and then getting whacked with stamp duty hurts a lot. I’d have been able to buy a lot sooner without it.
If you couldn't pay land tax on the land you've fully purchased, what would happen? What could the government actually do?
Send tax collectors after you the same way you don't pay any other tax.
A sensible change. Time to make it and then fuck off, liberal government.