How would the property tax rates be calculated?

The proposed rate structure for a potential property tax would include a fixed charge and a rate calculated on the unimproved land value of a property.

There would be four different rates proposed based on the property type – residential owner-occupied; residential investment; primary production and commercial. Residential owner-occupiers and farmers would pay lower rates than investors, which would pay lower rates than commercial property owners.

The following table outlines indicative property tax rates that could be used. These rates are not final and will be refined as feedback is received from the public.

 

Property type

Currently liable to stamp duty?

Currently liable to land tax?

Potential property tax rate

Owner-occupied residential property

Yes

No

$500 + 0.3% of unimproved land value

Investment residential property

Yes

Yes

$1,500 + 1.0% of unimproved land value

Primary production land (farmland)

Yes

No

$0 + 0.3% of unimproved land value

Commercial property

Yes

Yes

$0 + 2.6% of unimproved land value

You can find the unimproved land value of your property on the Valuer General website.

 

History of stamp duty

Stamp duty was introduced in NSW in July 1865. The current rates were set in 2004 and since 2019 the rate structure has been adjusted annually to account for inflation.

In 2019-20, stamp duty represented 23 per cent of the total annual tax revenue – the state’s second largest tax[1].

Over the last two decades a series of tax reviews have been conducted. These reviews have generally recommended abolition of stamp duty and replacement with a broad-based tax on land[2].

 

What are stamp duty and land tax?

Stamp duty

Stamp duty (also known as transfer duty) is payable in NSW upon purchasing the following:

  • Property, including a home or holiday home
  • An investment property
  • Vacant land or a farming property
  • Commercial or industrial properties
  • A business which includes land

Stamp duty is generally payable within three months of signing a contract for sale or transfer. Owner-occupiers buying off the plan have 15 months from the date of contract. It is typically calculated based on the property’s sale price or its current market value, whichever is higher.

For more information on stamp duty click here.

 

Land tax

Land tax is an annual tax levied at the end of each calendar year on all property you own that is above the threshold. An individual’s principal place of residence is exempt from this levy. The land tax is calculated on the total value of all your taxable land above the threshold. Thresholds for land values change each year.

For more information on land tax click here.

 

Consultation Paper

For more information on the proposed changes, read the Consultation Paper.

 

[1] NSW Review of Federal Financial Relations Draft Report

[2] Major reviews include Harvey et al (2001, IPART (2008), the Henry Review (Commonwealth of Australia 2010), the Lambert review (NSW Treasury 2011) and the Productivity Commission’s “Shifting the Dial” review (2017), Thodey Review of Federal Financial Relations (2020), NSW Productivity Commission Green Paper (2020)

Last updated: 17/11/2020