The NSW Government made the right decision in scrapping the ad valorem tax on property, according to the Property Council of Australia.

Legislation has now passed Parliament to axe the tax, which hits property transactions valued over $500,000.

The ad valorem tax was introduced by the previous NSW Government in last year’s State Budget. It applies at 0.2 percent on the transfer of property valued between $500,000 and $1 million – and 0.25 percent on the transfer of property valued above $1 million.

The NSW Executive Director of the Property Council, Glenn Byres, welcomed the abolition of the tax.

“The O’Farrell Government is right to move quickly on its election commitment to abolish the tax by July 1,” Mr Byres said.

“Axing the tax will save the property sector $429 million over four years – and send a welcome signal that NSW wants to build a more competitive tax base.

The ad valorem tax was a tax on investment, project development and homebuyers.

“It was a sneaky tax that effectively represented a second wave of stamp duty,” Mr Byres said.

The tax applied to commercial property transfers, site acquisitions for new projects across the range of asset classes and homebuyers. It was going to reach further into the residential market each year as property values increased and progressively hit more homebuyers.

“NSW will need to make smart policy choices to lure investment back to the state and abolition of ad valorem represents a great step,” added Mr Byres.

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