First home buyers to be given option of paying property tax over stamp duty
The upfront cost of stamp duty will be replaced with the option of paying property tax every year for first home buyers. Here’s how much you could save.
NSW
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First home buyers will be given a choice between paying stamp duty or an annual property tax as part of a $730 million commitment to be unveiled in Treasurer Matt Kean’s first budget.
The major tax overhaul is the first concrete step in Premier Dominic Perrottet’s plan to gradually replace stamp duty, which he has labelled as the government’s “worst” tax.
The plan is designed to help more people get their foot on the property ladder by removing the need to pay a large sum upfront when buying a first home.
Currently, first home buyers get stamp duty concessions when buying properties up to $800,000. The “First Home Buyer Choice” policy would apply to homes up to $1.5 million.
The property tax would be a yearly cost of $400, plus 0.3 per cent of a property’s land value.
That means, for a home with a land value of $500,000, first home buyers would pay $1,900 per year in property tax.
The cost would go up as the value of the land increases.
The government estimates the policy, alongside existing initiatives, will lead to about 97 per cent of first home buyers getting support to enter the property market.
In a major departure from stamp duty reform proposals previously put forward by the government, properties would not be locked in to property tax when sold.
Mr Perrottet said the policy would remove “one of the largest upfront costs” for young families looking to buy.
“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,” he said.
“Lifting home ownership is part of this Government’s efforts and ambition to help families who are feeling the squeeze,” he said.
Treasurer Matt Kean said that being able to choose property tax over stamp duty would make buying a house more accessible to young people.
“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,” he said.
He said $730 million had been committed over four years for the initiative.
For a NSW family on a median income, saving 15 per cent of that income, stamp duty adds about two years to the time required to save for the upfront costs of a median property.
Current stamp duty concessions will continue alongside the property tax plan, meaning first home buyers will still be exempt from stamp duty if they buy a property for $650,000 or less. For properties between $650,000 and $800,000, stamp duty discounts apply.
The Daily Telegraph on Monday compared the cost of stamp duty to the property tax plan for a home for sale in Rosehill with a $1,060,000 price guide.
At that price, the purchase would attract $42,790 in stamp duty. The home was valued in July 2021 to have a land value of $500,000, meaning buyers would be charged $1,900 per year in property tax.
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