NSW Budget to give first home buyers the option to avoid lump sum stamp duty

PHOTO: NSW stamp duty nets $13.8 billion. FILE

  • Buyers from January 16 next year can chose to pay an annual land tax instead 
  • Home owners in the scheme will pay $400 plus 0.3 per cent of the land value
  • Premier Dominic Perrottet has been pushing for change since he was Treasure

First homebuyers in NSW will no longer have to pay thousands of dollars in stamp duty under a plan to be unveiled in Tuesday’s state budget.

Premier Dominic Perrottet is overhauling the ‘hated tax’ – paid to the state government when purchasing a home – in favour of an annual land tax.

Those snapping up their first property will now have the option from January 16, 2023, of either paying the lump sum fee or shelling out for a smaller property tax each year – on homes up to $1.5 million.

The tax will be 0.3 per cent of the land value per year plus a flat fee of $400.

That means the owner of a $1.12million property – the medium property price in Sydney – may have a land value of about $750,000 and would need to pay $2650 a year instead of $49,934 upfront.

But the annual figure will increase in time as the value of the land rises.

The transactional tax calculated on a complicated sliding scale and enforced by every state and territory has long been considered a major hurdle for those hoping to get on the property ladder.

Homebuyers in NSW would no longer have to pay thousands of dollars in stamp duty under a plan to be unveiled in next today's state Budget. Pictured: Bondi Beach

Homebuyers in NSW would no longer have to pay thousands of dollars in stamp duty under a plan to be unveiled in next today’s state Budget. Pictured: Bondi Beach

Premier Dominic Perrottet when he was treasurer once called stamp duty ‘the worst tax a government could have’.

‘We want to lower the barriers to owning a home for first home buyers seeking a place of their own,’ he said.

‘In the past two decades, the share of first home buyers under 35 years of age has declined from 67 per cent to 61 per cent. Lifting home ownership is part of this Government’s efforts and ambition to help families who are feeling the squeeze.

‘The First Home Buyer Choice will remove one of the largest upfront costs to buying a home and help deliver a brighter future for first home buyers.’

The state government has allocated $728 million in today’s state budget over the next four years, as part of its housing affordability package aimed at getting more people on the property ladder.

Instead of paying the stamp duty fee up front buyers could chose to pay an annual land tax to the state government instead. Pictured: A home auction in Sydney

Instead of paying the stamp duty fee up front buyers could chose to pay an annual land tax to the state government instead. Pictured: A home auction in Sydney

Treasurer Matt Kean said the reforms will help about 55,000 people per year buy their first home.

‘We know that first home buyers are being forced to enter the property market later in life and this reform will make the property market more accessible for them,’ Mr Kean said.

support

Support independent Australian news aggregation

What is stamp duty?

Stamp duty is a tax paid to the state government by the buyer when purchasing a home

The figure depends on the value of the home but the median average stamp duty in Sydney is $49,934

First home buyers can qualify for a stamp duty exemption for homes they buy for less than $650,000 while a concessional rate is available for properties worth up to $800,000

The rule applies whether the home is brand new or existing

‘It will mean more NSW residents will get into their first home at an earlier age and achieve the great Australian dream of home ownership.’

For contracts exchanged in the period between enactment of the legislation and January 15 2023, eligible first home buyers will be able to opt-in and receive a refund of stamp duty already paid.

The current initiative which exempts first home buyers from paying stamp duty altogether on homes up to $650,000 will remain in place, with concession still available for properties up to $800,000.

Ken Morrison, chief executive of The Property Council of Australia, described stamp duty tax as ‘the worst thing in Australia’ because it ‘distorts behaviour, cripples job creation, lowers growth, and locks people into housing that might not be appropriate for their needs’.

Tim Lawless, head of research at property analytics firm CoreLogic Australia told Daily Mail Australia ‘It’s probably the state’s most hated tax there is.’

‘That’s because it’s a tax on transacting. It’s a tax you have to pay for the privilege of purchasing a property. And it’s a huge tax as well.’

Mr Lawless agrees that doing away with the lump sum would be a ‘smart move’.

‘It takes away one of the biggest hurdles to homebuyers,’ he said.

‘The tax has been a huge impediment to getting people into the marketplace.

‘So spreading the initial cost out over a long period of time makes a lot more sense and is a much more efficient way to administer that tax.’

Premier Perrottet, who has called stamp duty an 'inherently terrible tax', floated axing it when he was Treasurer but then backed down saying he needed federal government support

Premier Perrottet, who has called stamp duty an ‘inherently terrible tax’, floated axing it when he was Treasurer but then backed down saying he needed federal government support

Mr Perrottet when he was treasurer wanted 80 per cent of homes across the state to have the option of paying an annual land tax, and buyers would be eligible regardless of whether they were purchasing their first home.

However, he conceded  such large-scale reform couldn’t be achieved without the help of the Commonwealth.

‘It is a massive impediment for people getting into the housing market,’ Mr Perrottet told reporters.

‘But the reality is, state governments can’t do away with stamp duty without support from the federal government.

READ MORE VIA THE DAILY MAIL

Leave a Reply

Your email address will not be published.