"Property tax falls through the floor"

Simon Benson, April 14, 2005

THE State Government faces failing to meet property tax revenue targets for the first time in a decade.

With three months left in the Budget year, Treasury is looking at a shortfall -- based on its original estimates -- of about $400 million on purchaser and exit taxes on properties.

The exit tax has consistently failed to meet targets since its introduction last July.

But it's also the first time the purchaser duty has fallen short of budget estimates since Bob Carr took office in 1995.

While property groups argue the vendor tax has killed the investment market in NSW, other states fare worse due to the property market's national dip.

The Bureau of Statistics figures show investment and commercial property activity in NSW performed better last month than any other state.

The latest figures, obtained by The Daily Telegraph, coincide with the expected release today of an Access Economics report commissioned by the Property Council of Australia into the controversial 2.25 per cent vendor tax on the sale of investment properties.

The Property Council, the Housing Industry Association, the Real Estate Institute of Australia and the Urban Development Institute of Australia will discuss the tax with Treasurer Andrew Refshauge tomorrow.

It's believed the report will show that the vendor tax could be scrapped without any cost to the government, as it would be offset in a rebound in purchaser tax revenue.

"These results are very significant. This is the first time the Carr Government has been behind on achieving its transfer duty revenue target during its entire decade in office," the council's executive director Ken Morrison said.

The figures reveal that stamp duty collected on the purchase of properties had fallen $140m already this year based on government projections.

Even on the government's recently revised projections -- which it was forced to undertake in December when it realised the property market had weakened -- revenue is down by $84m so far.

The latest figures on the vendor duty show it has also fallen behind original revenue projections by $266m, and by around $10m on revised figures.

Former treasurer Michael Egan was forced to admit in December that the vendor tax experiment had failed.

The target of $690m was cut to about $350m.

The tax was created to deliver a cut in stamp duty for first homebuyers, which has so far cost the government $360m.

But Dr Refshauge said yesterday the revised vendor tax targets were on track to being met in the May budget.

The latest March figures show it collected $31m, which he claimed was a 13 per cent increase on the previous month.

"Bottom line is this duty goes toward stamp duty concession to first homebuyers," he said.

Further Information

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