First home buyers given land tax option in Perrottet’s stamp duty overhaul

First home buyers who opt into the centrepiece reform of Tuesday’s state budget will pay an annual levy of $400 and a 0.3 per cent tax on the value of their land in exchange for avoiding a crippling upfront stamp duty impost.

As revealed by The Sydney Morning Herald last week, Premier Dominic Perrottet’s long-touted housing reforms will give NSW first home buyers the option of paying an annual tax rather than stamp duty on properties worth up to $1.5 million.

NSW will move to phase out stamp duty, starting with first home buyers.Credit: Peter Rae

New details to be unveiled on Tuesday show first home buyers who opt into the property tax will pay the annual levy of $400 plus 0.3 per cent of the land value of the property under the new First Home Buyer Choice scheme. The property will not be locked into the tax scheme once it is sold.

Legislation to establish the property tax – one of the largest reforms to property taxation in the state for a generation – will be introduced during the second half of this year, with eligible first-home buyers able to opt in from January 16 next year.

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

First home buyers will continue to be eligible to apply for full stamp duty exemption for properties up to $650,000 and concessions will remain in place for properties between $650,000 and $800,000.

A major source of revenue for the government, stamp duty payments have surged by more than $5 billion during the pandemic off the back of higher house prices. Stamp duty is charged as a lump sum on a percentage of the purchase price of a property.

Sydney’s median house price rose 280 per cent over the past 20 years, from about $418,000 to about $1.59 million, while the cost of stamp duty on that median-priced house jumped 406 per cent from about $14,300 to almost $72,400.

To offset some of the lost revenue from the introduction of the new scheme, the government has set aside $728.6 million over four years.

As part of a broader housing policy, the government will also trial a shared equity scheme for first home buyers to help nurses, teachers, and police officers enter the housing market.

The government will contribute an equity share up to 40 per cent for a new property or up to 30 per cent for an existing property under $950,000 in Sydney and other major regional centres.

Perrottet said making home ownership a reality for more NSW families was a government priority.

“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.”

Minister for Planning and Homes Anthony Roberts said the property tax option was one of several methods to increase home ownership across NSW.

“This government will use every lever at its disposal – including tax, planning, supply, or working with the Commonwealth — to give more people in NSW the opportunity to own their own home.”

The NSW budget will be handed down at midday on Tuesday.

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