The New South Wales government’s offer to swap stamp duty for an annual property tax for first-time home buyers was widely applauded, but the Labor opposition hit back at the plan, saying it will cost owners much more in the long run.
Labor leader Chris Minns made the claim on Facebook and backed it up with a graph showing the property tax on a recently sold property in Sydney’s west will exceed the single stamp duty in 10 years.
“There’s only one reason Liberals want to tax your house forever – to make you pay more,” Mr Minns wrote.
“If a first-time home buyer bought this property sold yesterday under Dominic Perrottet’s 10-year scheme, they will pay more than they ever would have before.”
‘And the worst ? It never ends. We will stop this tax on your house forever.
NSW Labor leader Chris Minns insists the government’s option to pay property tax rather than stamp duty will cost property owners more in the long run
The modeling was done using a property in the western suburbs that sold for $980,000 with a land value of $760,000.
The stamp duty is a one-time payment based on the sale price and it was calculated at $39,190.
In calculations made by the Labor Party, the buyer of the property would get $41,787 by 2033 if they chose to pay property tax instead, which is calculated on 0.3% of the land’s value per year. year, plus a $400 flat rate.
However, it should be noted that the median length of time an NSW buyer will hold onto a property is 10 years, according to the NSW Treasury.
To back up his argument, Mr Minns released this graph which purports to show the amounts paid in property tax as opposed to stamp duty on property sold in western Sydney.
The assumptions made in the chart were that property and land values grew at the long-term average rate of 7% each year and that the economy grew at the rate of budget forecasts.
If a buyer vacates the home but keeps it as an investment property, their taxes will increase to $1,500 plus 1.1% of the property’s value.
What is stamp duty?
Stamp duty is a tax paid to the state government by the buyer when purchasing a home.
The figure depends on the value of the house, but the median average stamp duty in Sydney is $49,934.
First-time home buyers can qualify for a stamp duty exemption for homes they buy for less than $650,000, while a preferential rate is available for properties worth up to $650,000. $800,000.
The rule applies whether the house is new or existing.
Despite rejecting the government’s scheme, Labor has yet to say how it will help first-time home buyers enter the market.
A spokeswoman for NSW Treasurer Matt Kean said the scheme helps first-time home buyers by giving them choice.
“An online calculator will allow first-time home buyers to make an informed choice when purchasing a property and potentially remove the hurdle of a large down payment,” the spokeswoman said.
“A first-time homebuyer buying a Sydney apartment for $830,000 with a land value of $265,000 will have the choice of an initial stamp duty of $32,440 or an initial annual property charge of $1,195.”
The non-payment of stamp duty regime comes into force on January 16.
For contracts traded between the enactment of the legislation and January 15, 2023, eligible first-time home buyers will be able to register and receive a refund of stamp duty already paid.
The election not to pay stamp duty will only apply to properties under $1,500,000 and buyers must move into the property within 12 months of purchase and live there for six consecutive months.
The median average stamp duty in Sydney is $49,934. Pictured is an auction at Hurlstone Park in Sydney’s central west
The current initiative that exempts first-time home buyers from paying stamp duty on homes up to $650,000 will remain in place, with a concession still available for properties up to $800,000.
Political science professor Dominic O’Sullivan of Charles Sturt University called the reform bold but admitted it could be a double-edged sword.
“The negative effect of this policy change is that over the time people own the house, they might end up paying more,” he said.
“However, the upside is that it’s easier for people to get into the real estate market faster.”
Other analysts and players in the real estate industry have widely welcomed the scrapping of the stamp duty.
Instead of paying stamp duty up front, buyers could choose to pay an annual property tax to the state government instead. Pictured: A home auction in Sydney
Ken Morrison, chief executive of the Property Council of Australia, described the stamp duty as ‘the worst thing in Australia’ as it ‘distorts behaviour, cripples job creation, stunts growth and locks people into housing that may not suit their needs. ‘.
Tim Lawless, head of research at property analytics firm CoreLogic Australia, told Daily Mail Australia ‘it’s probably the most hated tax in the state’.
“That’s because it’s a transaction tax. It is a tax that you must pay to have the privilege of buying a property. And it’s also a huge tax.
Premier Perrottet, who called the stamp duty an ‘intrinsically terrible tax’ and said scrapping it for first-time homebuyers would provide a ‘brighter future’ for first-time homebuyers
Mr Lawless agreed that scrapping the lump sum would be a “smart move”.
“It removes one of the biggest hurdles for homebuyers,” he said.
“The tax has been a huge barrier to people entering the market.
“So spreading the initial cost over a long period of time makes a lot more sense and is a much more efficient way to administer this tax.”
New South Wales Premier Dominic Perrottet once called the stamp duty “the worst tax a government can have”, when he was treasurer.
“We want to lower the barriers to home ownership for first-time homebuyers looking for a home of their own,” he said.
“Over the past two decades, the share of first-time home buyers under the age of 35 has fallen from 67% to 61%. Increasing home ownership is part of this government’s efforts and ambition to help families who are under pressure.
“The First-Time Home Buyer’s Choice will remove one of the biggest up-front costs of buying a home and help provide a brighter future for first-time home buyers.”
The NSW government derives 32% of its revenue from stamp duty, which was worth $12.2 billion in the 10 months to April 2022, according to Revenue NSW.
This figure has risen from 18.3% 10 years ago as house prices soared. In fiscal year 2020-21, $9.6 billion in stamp duty was collected
The NSW Government says it will collect 20% less revenue from first-time home buyers who switch to paying property tax (pictured, a Sydney estate agent)
The NSW Treasury predicted that switching to a property tax would generate around 20% less revenue than the current system.
In fiscal year 2020-21, $9.6 billion in stamp duty was collected.
Even with house prices falling in recent weeks, and even a drop in some suburbs, the state government will likely have collected $14 billion in stamp duty by the end of the 2021-22 fiscal year. , June 30.
Monthly stamp duty revenues jumped during the Covid pandemic, rising from a low of $450 million in May 2020 to a high of $1.6 billion in October and December 2021.
The figure fell to $976 million in April as house prices stabilized or fell.