Download the full submission or read the excerpt below.
This year, the Property Council’s pre-budget submission focuses on one reform measure which would provide a significant boost to the State’s economy – the abolition of stamp duties on nonresidential property: on conveyances, leases and mortgages.
In light of the massive windfalls in stamp duty revenue over the last few years, we believe that now is the time to start removing this impost on NSW businesses and on the 9 million ordinary Australians whose retirement savings are invested in commercial property through their superannuation, life insurance, and managed funds such as property trusts and balanced funds.
There is a clear economic argument for removing stamp duty on commercial property. It restricts and distorts capital investment, and impedes job creation. According to Access Economics, stamp duty on commercial conveyancing is the most inefficient tax in Australia.
The States agreed to abolish these stamp duties in return for GST revenue under the original GST Intergovernmental Agreement. While this commitment was renegotiated following the exemption of food, there was nevertheless an expectation that these State taxes would be abolished once GST revenues grew to a level to replace them. Under the revised Intergovernmental Agreement, the States agreed to review (by 2005) the need to retain them.
GST revenue in the first year was significantly above expectations, and indications are that revenues will continue to exceed initial estimates. In these circumstances, there is an obligation on the NSW Government not to ‘double dip’ but to accelerate the removal of inefficient State taxes.
The Property Council is therefore seeking an in principle commitment by the Government to abolish stamp duties on non-residential conveyances, leases and mortgages by 2005. In the meantime, the Government should commence its own review of stamp duties as a precursor to the national review by the Ministerial Council and, as a down payment on reform, immediately abolish lease duty and reduce stamp duty on commercial conveyancing by 10%.
Our submission also includes some minor expenditure proposals, chiefly concerned with ensuring that proposed reforms to the NSW planning system become a reality, and that new taxes are not imposed on NSW business, such as the one proposed by North Sydney Council to fund the upgrade of North Sydney railway station.
However, the Property Council considers that the potential benefits for NSW from the abolition of stamp duties on commercial property, in terms of increased economic activity, investment and growth, would far outweigh the economic benefits from any new expenditure proposals.