NSW real estate: Dominic Perrottet pushes ahead with major changes to stamp duty

Dominic Perrottet is confident he can achieve a sweeping tax reform of the NSW housing market by the end of the year, saying the policy will be a ‘game changer’ for people struggling to buy their first home.

The state government is set to submit a bill to parliament this week that, if passed, would allow first-time homebuyers to pay an annual land tax, rather than be plagued with stamp duty.

“This is a game changer,” the prime minister told reporters on Monday.

The opt-in trial for the First Home Buyer Choice scheme would mean new property buyers would not be burdened by having to save such large deposits to enter the property market, the prime minister said.

“We’ve all gone through those months and months of saving and saving and saving to get in, and by the time you get to the end you’ve gone backwards,” Mr. Perrottet said.

‘So many young people have trouble saving that advance. So many young people are having a hard time getting into the real estate market.’

The proposed scheme will start in January, if approved by parliament this week.

Instead of paying stamp duty, buyers can choose an annual fee of $400 and 0.3 percent of the land value while it is their primary residence, and the next buyer of the property can opt out of the scheme.

The government says about 84 percent of homes sold in NSW fall under the $1.5 million eligibility limit of the proposed scheme.

An online calculator was launched on the ServiceNSW website on Monday, allowing people to search for a home using data from the appraiser general to see what they would pay in stamp duty compared to land tax.

An $830,000 apartment with a land value of $265,000 would bring in a payment of $1195 in the first year, compared to $32,440 for stamp duty.

A $1.35 million home with a land value of $810,000 would charge $58,450 in stamp duty, compared to a $2,830 payment in the first year.

Land suitable for development is a finite resource and the value of land usually increases over time, which also increases the payment.

With the trial budgeted at $728.6 million over four years, the change would cost the budget in the near term, but ongoing land taxes could provide a more predictable revenue base compared to stamp duty, which relies on real estate transactions rather than continuing ownership.

The bill would allow first-time homebuyers to pay an annual land tax in lieu of stamp duty. The owner’s annual tax would be $400 plus 0.3 percent of the land value while it is their primary residence (stock image)

Labor opposed the move, claiming it would be a ‘forever’ tax on about 80 percent of family homes and properties. The Greens were in favor of abolishing stamp duty but said Mr Perrottet’s model was not ideal for buyers (stock image)

Labor will oppose the land tax process and warn that it will become a ‘forever’ tax on about 80 percent of all family homes and properties.

Shadow treasurer Daniel Mookhey said he was disappointed in the prime minister’s efforts to push the changes through parliament before the end of the year.

‘The biggest change to the NSW tax law in 50 years shouldn’t be rushed through Parliament in 15 days.’

“It’s not a change that (Mr Perrottet) has a mandate for, and he shouldn’t try to rush it through parliament in October when there are elections in March.”

Mr Mookhey said he was concerned about a warning from the Commonwealth Grants Commission that the changes could cause NSW to lose up to $1.2 billion in GST revenue.

The Greens said they were broadly in favor of a well-planned transition from stamp duty to land tax, but said Perrottet’s model was far from ideal.

“This is not a reform that you can rush through without thinking and deliberating,” Greens MP Abigail Boyd told AAP.

“We will insist that this bill be referred for an investigation to make sure we are doing it right.”

The prime minister said he was confident that the government could pass the bill and was in talks with members of the crossbench.

“As a father, the biggest concern I have for my children is being able to buy a house in our great condition,” Perrottet said.

“There isn’t a parent in all of NSW who isn’t concerned about that.”