State pushes ahead with "insane" proposal
A new reform by the Perrottet government will give New South Wales home buyers the choice of paying stamp duty or an annual land tax.
NSW Premier Dominic Perrottet sees the overhaul as potentially legacy-making as he prepares for a state election in March 2023, according to a report by The Australian Financial Review.
The $730 million plan is a highlight of the NSW budget to be presented by Treasurer Matt Keane today. Under the new plan, first-home buyers will be able to choose between paying stamp duty up front or an annual property tax payment of $400 plus 0.3% of the land value of the property. The plan will be available on homes valued at less than $1.5 million.
Perrottet said the plan would remove one of the largest upfront costs faced by home buyers.
“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% to 61%.”
Perrottet first spoke of his desire to overhaul – and potentially eliminate – stamp duty in late 2020, AFR reported. However, the premier has faced headwinds in realising the reform thanks to the impact of moving away from stamp duty, which has dumped nearly $1 billion into state coffers every month for the past 13 months.
It has been estimated that a complete transition to land tax would cause a 20% hit to NSW government revenues. And earlier this month, federal Treasurer Jim Chalmers ruled out compensating the states for property tax reform, AFR reported.
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The new scheme, which is limited to a relatively small segment of the housing market, won’t depend on support from the federal government.
Kean has been more ambivalent about the plan, which he has called “Premier Perrottet’s preferred method.” However, ahead of the budget Kean said the plan would help more NSW residents buy their first homes earlier, AFR reported.
“We know that first-home buyers are being forced to enter the property market later in life, and this reform will make the property market more accessible for them,” Kean said.
According to government estimates, opting to pay a land tax rather than stamp duty could push forward buying a home by about two years.
The program is the second of its kind in Australia. The Australian Capital Territory is halfway through a 20-year transition from stamp duty to land tax. The ACT plan removes a home permanently from the stamp duty system once a buyer chooses the land tax option. AFR reported.
The NSW plan differs in that homes can revert to stamp duty once they are sold to a new owner. Legislation for the plan will be introduced into Parliament in the second half of 2022, allowing eligible buyers to apply to opt into the program starting Jan. 16, 2023.
Perrottet’s government has shown a willingness to depart from the policy and tax reform principles promoted by the federal Liberal party in the most recent federal election, according to AFR. On Sunday, Perrottet announced an $800 million shared equity housing plan similar to a Labor policy that was derided by his federal party.
The scheme offers key workers – including police, nurses and teachers – the opportunity to buy a home with a deposit as little as 2%, while the government contributes an equity stake of up to 40% on new homes and up to 30% on existing property.
The plan echoes an election platform promoted by Labor Party leader Anthony Albanese during the federal election campaign – a plan that Perrottet’s federal party leader, Scott Morrison, declared “insane.”
Perrottet, however, said the plan “makes sense.” He said it would expedite homeownership for key workers and their families across New South Wales, AFR reported.
On Monday, the government announced a $500 million package aimed at easing the NSW housing crisis by freeing up more land for development and fast-tracking planning approvals, according to AFR. The package would enable several hundred thousand new homes to be built in Sydney’s southwest and northwest.