Queensland Economic Advocacy Solutions

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NSW fires latest salvo in tax competitiveness war

Competition is a beautiful and ruthless concept.  It is a situation in which two or more people or groups are trying to get something which not everyone can have.  In the business world this is predominantly market share. For State Governments competition is better known as competitive federalism whereby each State Government is in fierce competition with each other to retain and attract business investment or people to their state.

The main area in which State Government’s compete is to have the most attractive business operating environment determined by both tax and regulatory settings. This week New South Wales Government have launched the latest salvo in the tax competitiveness war in adjusting their stamp duty arrangements. 

NSW Treasurer Dominic Perrottet has announced that current stamp duty brackets will be indexed at CPI for all property transactions. NSW will be the first state or territory in Australia to index Stamp Duty brackets to CPI and it represents the first major change to stamp duty in over 30 years. Under the changes the price bands, or brackets, which determine how much stamp duty is paid will start to rise with inflation from the middle of next year. Transfer duty is charged at various rates on the transfer of real and business property with rates for both NSW and Queensland below.

The tax reform will cost the state budget about $185 million in the three years after the changes take effect on July 1 next year. The indexation of rates will give buyers modest savings initially but will, over time, ensure no repeat of the current situation where stamp duty is a barrier for first home buyers, up sizers and right sizers.  It will ensure that the stamp duty cost for commercial properties will also be moderated encouraging investment and market mobility. To illustrate, Mr Perrottet said that if the state’s stamp duty brackets had been indexed when they were introduced in 1986 someone purchasing a $1 million property today would pay around $80,000 less in stamp duty.

The reason QEAS has covered this development is that unless Queensland matches this initiative in our 2019-20 State Budget, investors may look to NSW as a more attractive jurisdiction, thereby threatening Queensland investment.  The pressure will be on Treasurer Jackie Trad to consider this latest development.

Key points:

  • NSW Stamp Duty Brackets will be indexed at CPI
  • change will apply to all property transactions in NSW
  • First major change to stamp duty in 30 years
  • Will affect transactions made on or after 1 July 2019.

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