NSW government to reform stamp duty with annual land tax choice, in major election promise

All NSW home buyers could soon forgo paying stamp duty in lieu of an annual land tax, in a major election push aimed at wooing voters.

All NSW home buyers will have the option to choose to ditch stamp duty for a lower ongoing annual land tax in a major election promise announced by the government.

Buyers of apartment dwelling would benefit the most from the reform, with a $1.5m property taking about 46 years to equal the same outright cost incurred by stamp duty.

The proposed changes were heralded by NSW Premier Dominic Perrottet on Sunday in an attempt to woo potential homeowners.

As of January 16, first homebuyers have been able to choose between paying stamp duty or an ongoing annual land tax calculated at $400, plus 0.3 per cent of their property’s land value, on properties under $1.5m.

Under the First Home Buyer Choice scheme, stamp duty for a home valued at $1.5m would cost about $66,700, whereas a land tax would incur an annual fee of about $3850.

The major tax reform would give all home buyers a choice between stamp duty and an annual land tax. Picture: NCA NewsWire/ Gaye Gerard

With those figures, it would take more than 17 years for the total land tax paid to surpass the outright stamp duty payment.

However, the government’s expanded stamp duty reform would increase the $1.5m cap by $50,000 a year starting in the 2023-24 financial year.

Buyers would be able to own two properties under the land tax scheme, although additional homes would incur stamp duty.

Announcing the major tax reform in Peakhurst, in the Opposition Leader Chris Minns’ electorate of Kogarah, the Premier said the policy was about giving home buyers “a choice”.

“Stamp duty is a terrible tax. As the Treasurer said, it’s a barrier to people being able to purchase their home,” said Mr Perrottet.

“We want them to be able to continue to move up the property ladder and make the choices that suit their family and their circumstances.”

Premier Dominic Perrottet said the scheme would give home buyers a choice. Picture: NCA NewsWire/ David Swift

Treasurer Matt Kean said more than 1000 people have already opted for the scheme since January 16.

“We know that’s a family purchasing a home for $1m in Western Sydney and owning it for five years and then selling it, upgrading to a home with $1.5m can save up to $90,000 under this scheme,” he said.

In comparison, Labor’s policy for first homebuyers would abolish stamp duty for homes up to $800,000, increasing the current cap by $150,000.

A discounted stamp duty rate would apply for properties under $1m.

Big winner in proposed stamp duty cuts

Managing Director of Sydney-based mortgage brokerage firm Pure Finance, Brendan Dixon says replacing stamp duty with a land tax would see apartment buyers benefit the most, as they command less land value.

“A block of apartments is one block of land but the value of the land that is divided across the apartments in the building, and it depends on what your allotment is,” Mr Dixon told NCA NewsWire.

The Premier made the announcement in his rival’s electorate. Picture: NewsWire/ Monique Harmer

“So the annual land tax for apartments is a lot cheaper than it is for houses but it will vary building to building, and depending on the area you’re in.”

Using the example of a $1.5m apartment in Sydney’s inner-city suburb of Surry Hills, the stamp duty would be $66,700, while the annual land tax would cost $1445.

“In this example, the owners would need to remain in the property for a massive 46 years for it to be worth paying the lump sum stamp duty. A bit of a no-brainer,” Mr Dixon said.