Stamp duty NSW: ‘Once in a generation’ plan to boost home ownership

A crucial aspect of NSW home ownership could be radically transformed as soon as next week’s state budget.

So the end of stamp duty hitting all NSW home buyers is nearing, with some speculation that reform will come as soon as in next week’s state budget.

Premier Dominic Perrottet has long viewed the reform – which would see stamp duty replaced by an annual land tax – as a “once-in-a-generation reform”.

However he’s been stymied as the reform would best be achieved by the federal government coming to the aid of the states, given the dramatic revenue reduction that would arise on implementation.

That has yet to happen although the incoming federal treasurer Jim Chalmers has agreed for the overhaul of property taxes to be discussed next month at a meeting of state treasurers, as part of their work to tackle housing affordability and lift Australia’s economic productivity.

Chalmers has signalled the specific reform proposals were a matter for the states, while Perrottet wants the federal government to finance their reforms.

Premier Dominic Perrottet has long viewed the reform – which would see stamp duty replaced by an annual land tax – as a “once-in-a-generation reform”. Picture: NCA NewsWire / Jeremy Piper

Under the mooted NSW proposal, homebuyers would be given the choice to either pay stamp duty or an annual property tax around when they buy a home.

Once a property has been nominated by the buyer as a land tax property, it would remain so, even when re-sold. A $1.15 million house would attract a stamp duty of $48,000, or an annual tax of about $2232 for owner-occupiers, which would then rise depending on how the tax is indexed.

Last financial year, the NSW government collected $9.4 billion in stamp duty from 234,000 sales, securing 28 per cent of the NSW tax take. And so far this year, with 11 record months, it has grossed a stunning $13.2 billion from 223,000 sales.

It has been estimated that, once fully introduced, the government will see a 20 per cent drop in revenue in its early stages, offset by productivity gains. NSW says the stamp duty overhaul would permanently boost the state economy by 1.7 per cent, about $10 billion a year, and lift homeownership by 300,000.

Ayesha Jabeen is one of the most recent first-home buyers, with the 29-year-old construction worker finally buying her first home on March 31. Picture: Tony Gough

Until the state budget there will be speculation as to whether, and how, NSW will go it alone.

I’d suggest the scheme could logically incrementally start with just first time buyers having the option to participate from next week. Of course FHBs have long enjoyed stamp duty exemptions so it won’t be at a huge cost to the budget.

No one disputes that the current stamp duty cost discourages people from buying and moving house, but every time the reform is raised there is uncertainty among buyers and sellers which doesn’t help the market.

It certainly makes sense to postpone any purchase until the June 21 state budget when things become official if you are interested in avoiding stamp duty and participating in any new scheme.