The New South Wales government has made a major election promise to eliminate stamp duty for home buyers in favour of a lower ongoing annual land tax. This would be a major shake up of the NSW property market and could signify a shift in the way Australians purchase homes.
The proposed changes, announced by NSW Premier Dominic Perrottet on Sunday, are aimed at taking the sting out of stamp duty for home buyers. Under the plan, buyers of houses and apartments would be able to opt to pay a lower annual land tax in lieu of the hefty stamp duty.
The benefits of the plan would be most felt by buyers of apartments. A $1.5 million property in Sydney would take approximately 46 years to equal the same outright cost incurred by stamp duty. This would be a major saving for those looking to purchase a property in the city.
Since January 16, first homebuyers have had the option to either pay stamp duty or an annual land tax of $400, plus 0.3% of their property’s land value, on properties valued at less than $1.5 million.
For a home valued at $1.5m, the First Home Buyer Choice scheme would require a stamp duty of approximately $66,700, while an annual land tax of roughly $3850 would need to be paid.
If the government’s expanded stamp duty reform is implemented starting in the 2023-24 financial year, it would take more than 17 years for the total land tax paid to surpass the outright stamp duty payment, despite the reform increasing the $1.5m cap by $50,000 a year.
