NSW Budget Dominic Perrottet: How the new stamp duty scheme will work for first home buyers
Dominic Perrottet will help first-time homebuyers climb the real estate ladder with two new schemes announced today in his state budget, including changes to stamp duties that could save young people $50,000 at the time of purchase.
With the Prime Minister of NSW, first-time buyers can pay an annual land tax consisting of a fee of $400, plus 0.3 percent of the land value, instead of charging them a crippling amount up front.
The state government will also try a shared equality scheme for teachers, nurses, police, single parents and older single adults.
Despite a small drop in recent months, house prices in Sydney are still 22.7 percent above pre-2020 levels, making owning a home an impossible dream for many low- and middle-income earners.
Perrottet, who faces elections in March, wants to help tenants enter the real estate market to give them a share in society and the chance to ‘become wealth’.
Here, Daily Mail Australia takes a look at how this ambitious housing policy will work.
Stamp duty revision
First-time homebuyers no longer have to pay thousands of dollars in stamp duty and can instead pay an annual land tax.
The hated tax — which averages about $50,000 — is paid to the state government by a home buyer.
But new buyers of properties worth up to $1.5 million can opt for an annual land tax instead $400 plus 0.3 percent of the land value.
First-time homebuyers no longer have to pay thousands of dollars in stamp duty and can pay an annual land tax instead
Dominic Perrottet (pictured) will help first home buyers climb the real estate ladder with two new schemes announced today in his state budget
A Rosehill property costing about $1 million would incur a stamp duty of $42,000 or an annual tax of $1,900 per year.
However, that $1,900 figure would increase as the land’s value rises.
If the buyers have owned the house for several years, they could pay more over time than if they had simply paid the $42,000 upfront.
But the government thinks it is good to offer the choice, so that first home buyers can move into a home earlier.
Treasurer Matt Kean said: ‘We know that first-time homebuyers are forced to enter the real estate market later in life and this reform will make the real estate market more accessible to them.
“It means more NSW residents will be able to live in their first home at a younger age and realize the great Australian dream of home ownership.”
The scheme will be available from January 16, 2023 and will help an estimated 55,000 households per year.
First-time homebuyers remain eligible to apply for full stamp duty exemptions on properties up to $650,000.
Stamp duty concessions remain in effect for properties between $650,000 and $800,000.
Instead of paying the stamp duty upfront, buyers could choose to pay an annual land tax to the state government instead. Pictured: A house auction in Sydney
Stamp duty explained
Stamp duty is a tax paid by the buyer to the state government when purchasing a home
The figure depends on the value of the house, but the average average stamp duty in Sydney is $49,934
First-time homebuyers may qualify for stamp duty exemption for homes they purchase for less than $650,000, while a concessional rate is available for properties up to $800,000
The rule applies whether the house is brand new or existing
The average average stamp duty in Sydney is $49,934.
Ken Morrison, chief executive of The Property Council of Australia, described the stamp duty tax as “the worst in Australia” because it “disrupts behaviour, paralyzes job creation, slows growth and traps people in homes that may not be suitable for their needs. †
Prime Minister Perrottet, who has called stamp duty an “inherently appalling tax,” abolished it completely when he was treasurer.
He wanted 80 percent of buyers statewide to have the ability to pay an annual land tax, regardless of whether they bought their first home.
He admitted, however, that such a large-scale reform could not have been achieved without the help of the Commonwealth, which was not there.
The NSW government gets 32 percent of its revenue from stamp duties, which were worth $12.2 billion in the 10 months to April 2022, according to Revenue NSW.
This is up from 18.3 percent 10 years ago when house prices skyrocketed.
NSW Treasury predicted that switching to a land tax would bring about 20 percent less revenue than the current system.
In fiscal year 2020-2021, $9.6 billion in stamp duty was collected.
Labor opposes the transition to a land tax model.
Shared share plan
On Sunday, the Prime Minister announced that frontline workers and singles over 50 will get ‘a head start’ on the NSW real estate market, with the state government introducing a shared housing scheme into the budget.
The $780.4 million pilot program is open to 3,000 frontline workers and single parents or single adults over the age of 50.
It is open to singles earning up to $90,000 a year, or couples earning up to $120,000.
Key employees buying a home for the first time who are nurses, teachers or police officers – as well as elderly singles over 50 and single parents with a child or children under 18 can apply for shared equity
The government will contribute up to 40 percent of the equity of a new home and up to 30 percent of an existing home, and will require a two percent down payment.
The plan will mirror the new federal Labor government’s shared stock plan, which Scott Morrison opposed.
Mr Kean said the policy was to help people achieve their goals and make their dreams come true.
“One of the specific cohorts that we’re targeting is that cohort that is too common and that’s older singles, especially women who are divorced,” said Mr. Kean.
‘We want to make it as easy as possible for that cohort to get back on their feet safely.’
Eligible properties are limited to $950,000 in metropolitan Sydney and $600,000 in other parts of the state.
Who is eligible for the share plan?
Under the NSW Government’s Shared Equity Trial:
· A maximum of 3,000 places will become available annually during two financial years;
· Key worker first home buyers who are nurses, teachers or police † as well as older singles over 50 and single parents with a child or children under 18 can apply†
· Participants must have a maximum gross income of $90,000 for singles and $120,000 for couples;
· Participants must have a minimum deposit of 2 percent of the purchase price†
· The government takes a maximum personal contribution of 40 percent for a new home and 30 percent for an existing home, and
The maximum value of the property that can be purchased under the scheme is $950,000 in Sydney and regional centers including the Central Coast, Illawarra, Lake Macquarie, Newcastle and the North Coast of NSW, and $600,000 in others parts of NSW.