NSW first-home buyers can now choose between stamp duty or a land tax

First-home buyers in New South Wales are now able to choose between paying an annual land tax or a one-off stamp duty levy after the tax reform measure passed parliament on Thursday (10 November).

The legislation gives first-home buyers the option to pay an annual tax on all properties up to $1.5 million.

The NSW Labor opposition has already vowed to abolish the Perrottet government’s stamp duty reforms if it wins the next election in 2023.

Mr Perrottet said the policy would deliver savings to homebuyers.

“For the first time, we will provide first home buyers with a choice, helping thousands of people to shave around two years off the time needed to save for a deposit,” he said.

“We know there could be nothing more important than home ownership, particularly for young families.”

Labor Leader Chris Minns responded to the bill’s passing by describing it as a “trojan horse” that would lead to a land tax on families that will increase over time.

“Our concern is that future governments will jack up the land tax rate,” Labor Leader Chris Minns said.

“If you're already on that merry-go-round, you have to trust this premier, and all future premiers, not to up the land tax rate on your family home.”

Stamp duty receipts are down 7 per cent over four months, reflecting the fall in Sydney property prices.

Analysis by the NSW Treasury submitted to Parliament earlier this month revealed that two-thirds of first-home buyers will opt against paying stamp duty, with further research indicating that up to 80 per cent of home sales could benefit from the scheme.

Treasury has estimated that half of all owner-occupiers sell their properties within 10.5 years, while two-thirds of owner-occupiers sell their properties within 20 years.

Over the next four years, the NSW government has allocated $728.6 million to the First Home Buyer Choice scheme.

Those choosing the annual tax will pay the equivalent of the up-front stamp duty after 21 years to 63 years, depending on the purchase price, Urban Taskforce chief executive Tom Forrest told AAP.

“These changes will make it easier for first home buyers to enter the market and the choice, for most, will be a no-brainer decision,” he said.

Victorian voters heading to the polls for a state election in two weeks will also have an opportunity to bring about stamp duty reform.

The Coalition’s Opposition Leader Matthew Guy has vowed to remove stamp duty for first-home buyers purchasing a property for less than $1 million.

How it works

RateCity offered an example of how the new NSW scheme could work for a prospective first home buyer:

You buy an apartment in a suburb of Sydney for $750,000. The property has been calculated to have a land value of $270,000. If you’re an eligible first home buyer, you’ll need to pay concessional stamp duty of $20,870.

In 2022-23, the annual property tax on the apartment would be $1,210. If you intend to upgrade to a larger home in the next five to ten years, you might take up the First Home Buyer Choice as this tax option may save you money, even though you qualify for other first home buyer tax concessions.

If you buy a property from somebody who is paying the annual land tax, you will not be subject to the property tax - unless you’re also an eligible first home buyer and choose to adopt the scheme.

Eligibility

• You must be an individual (not a company or trust) and over 18 years old.
• You, or at least one person you’re buying with, must be an Australian citizen or permanent resident.
• You or your spouse must not have previously owned or co-owned residential property in Australia or received a First Home Buyer Grant or duty concessions.
• The property you are buying must be worth less than or equal to $1.5 million.
• You must move into the property within 12 months of purchase and live in it continuously for at least six months.
• You must sign the contract of purchase on or after the scheme commencement date.