State Government to Introduce Land Tax Reform for First Home Buyers

A real estate sign is seen at a property in Sydney, Australia, on Sept. 6, 2022. Lisa Maree Williams/Getty Images

The New South Wales (NSW) government will introduce legislation to scrap the First Home Buyer Choice assistance and establish a new stamp duty exemption scheme.

The former Coalition government launched the temporary First Home Buyer Choice program in January to boost homeownership among the state residents.

At the time, the coalition touted the program as a “game-changer” reform, saying it would allow first-home buyers to spend less time saving for a deposit.

Under the scheme, NSW residents purchasing a property of up to $1.5 million (US$1 million) from Nov. 11, 2022, to July 1, 2023, can choose between paying upfront stamp duty, which can reach tens of thousands of dollars, or an annual land tax ($400 plus 0.3 percent of land value).

On average, around 1,200 home buyers per month have switched to the new annual land tax since the scheme was introduced.

On May 22, the Labor government announced that it would move legislation this week to replace the scheme with stamp duty exemptions and concessions after it expired on July 1.

The NSW government said the new system would be fairer and simpler, allowing 84 percent of future first-home buyers to pay no tax or a reduced rate.

It also argued that the First Home Buyer Choice scheme under the former government disproportionately benefited those buying properties at the top end.

Details of the New Legislation

Under the proposed changes, the state government will lift the threshold for stamp duty exemptions for first-home buyers from $650,000 to $800,000.

This means a homeowner with an $800,000 property will dodge a pricey stamp duty of $31,090.

Similarly, the stamp duty concession threshold will be raised from $800,000 to $1 million.

NSW Premier Chris Minns said the new scheme would be better for the majority of first-home buyers.

“Over 80 percent of first-home buyers purchase a property under $1 million in NSW,” he told Sydney Radio 2GB.

“I'd much rather people pay a reduced amount rather than a land tax forever.”

NSW Premier Chris Minns speaks during the NSW Labor reception in Sydney, Australia, on March 25, 2023. AAP Image/Dean Lewins

The premier also noted that the scheme was designed to support those in greatest need.

“When we are producing a tax subsidy, it should go to families that would ordinarily not be able to get into the housing market,” he said.

While the Labor government claimed the majority of NSW first-home buyers would benefit from the proposed changes, those buying homes worth above $1 million and below $1.5 million appear to be the biggest losers after July 1.

Apart from the threshold changes, the new legislation will raise the bar for homeowner eligibility by increasing the requirement to live in the home from six months to 12 months.

It will also include grandfathering provisions, allowing first-home buyers who signed up for the annual property tax to continue to pay that tax until they sell their property.

As the Labor Party holds the minority in both houses, it will need the support of two crossbenchers in the lower house and six in the upper house to pass the legislation.

Meanwhile, the coalition has expressed that it would oppose changes to the First Home Buyer Choice program.

The Epoch Times has reached out to the NSW Liberal Party for comment but has yet to receive a reply in time for publication.