New South Wales Premier Bob Carr has acknowledged the broadening of land tax and the introduction of a vendor tax last year are hurting the Labor Party in NSW.
Western Australia was a substantial beneficiary after the taxes were introduced in NSW in April 2004, with property agents in this state reporting an immediate increase in inquiries and investment from NSW.
For its part the Western Australian Government has made it clear it has no intention of introducing a NSW-style vendor tax.
The broadening of land tax is estimated to have affected 60,000 landowners who received their land tax assessments in January, and applies to second properties regardless of whether there is rental income or not.
Mr Carr conceded the changes to land tax would be reviewed in the budget in May.
After coming under attack by several backbenchers, he said everything the critics were saying about the politics of the tax were right.
Nicola Woodward from Sydney-based Apex Property Consulting said the reforming of the property taxes slowed the market significantly in NSW.
“At the same time as the two new NSW taxes came through, the Federal Government tightened the rules significantly in relation to depreciation,” she said.
“The vendor tax in particular is fairly complicated for mum and dads to understand, and people who in reality wouldn’t be affected became unwilling to sell.
“There was a lot of anecdotal evidence of people going to places other than NSW for investment, particularly cheaper places like Perth.
“A lot of investors are going to New Zealand too, because there is no capital gains tax.
“The vendor duty needs to be abolished, and there is a likelihood it will with the new finance minister here.”
Ms Woodward said the NSW market was susceptible to “scaremongering”.
A 2.25 per cent vendor tax is payable upon sale in NSW if the gain on the property has been over 12.5 per cent.
