An experiment allowing first-home buyers to dodge substantial upfront costs will be replaced with a new scheme that will exempt the majority of them from paying any stamp duty.
Premier Chris Minns says the new system will be fairer, simpler and mean five out of every six first home buyers will pay no tax or a reduced rate.
The coalition government’s First Home Buyer Choice initiative will end on July 1, stopping those buying property up to $1.5 million in NSW from choosing between paying upfront stamp duty or an annual land tax.
An average of 1200 people per month have taken up the scheme since it was introduced in November.
But the Minns Labor government will this week take steps to end the scheme and replace it with stamp duty exemptions and concessions.
The changes will cut the stamp duty bill on an $800,000 property from $31,090 to zero and ensure some reduction applies to homes valued up to $1 million.
The premier says it’s a better scheme for the majority of first-home buyers.
“Over 80 per cent of first-home buyers purchase a property under $1 million in NSW,” he told Sydney radio 2GB on Monday.
Half the properties in NSW cost $800,000 or less, ensuring those first-time buyers “pay absolutely no stamp duty at all”.
Two thirds of properties in western Sydney cost below $1 million and under Labor’s plans those first-time buyers will pay a reduced stamp duty.
“I’d much rather people pay a reduced amount rather than a land tax forever,” Mr Minns said.
The new scheme was designed to help those in greatest need, he said.
“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.
The legislation to be introduced to parliament this week will also double the residency requirement to 12 months to make it harder for investors to benefit from the scheme.
The biggest losers will be those buying homes worth nearly $1.5 million, who won’t be able to avoid a stamp duty bill of up to $66,700.
The land tax choice model disproportionately benefited those buying properties at the top end of the scheme, the government said.
Labor will need two crossbenchers in the lower house and six in the upper house to pass its proposed changes.
The coalition has already signalled it will oppose modifications to its choice program, which allows property owners to pay $400 plus 0.3 per cent of their property’s land value as an annual fee.
The proposed legislation will include grandfathering provisions so first home buyers who opted into the annual property tax can continue to pay that tax until they sell their property.
– AAP
