- The scheme allows first home buyers to choose between an upfront stamp duty or opt for an annual land
- It is calculated at 0.3% of land value, with a $400 annual fee
- Tim McKibbin of REINSW says the tax is 'at odds' with the idea of housing affordability
With the NSW state government introducing a new property tax bill into parliament last week, the Real Estate Institute of New South Wales (REINSW) has strongly criticised the tax.
To be called the First Home Buyer Choice scheme, the tax will be a trial and allow first-home buyers to swap stamp duty for effectively an ongoing land tax.
It will be set at a $400 annual fee plus 0.3% of the land value. The price cap is $1.5 million, covering around 84% of homes sold in the state according to the state government.
“Home ownership is the investment that starts paying dividends from the moment you walk through your front door for the first time and we don’t want people to have to wait an extra couple of years to reap those benefits,” said NSW Premier Dominic Perrottet.
“Choice is at the heart of these game-changing reforms that will put keys in the hands of new home owners much sooner and allow young people to capitalise on the financial security that home ownership delivers.”
Dominic Perrottet., NSW Premier
“Treasury analysis indicates half of all owner-occupiers sell their home within 10.5 years, with first home buyers likely to sell even sooner. That means for the majority of first home buyers that don’t already receive stamp duty assistance, First Home Buyer Choice will not only allow them to break into the property market earlier, but pay less overall,” added Treasurer Matt Kean.
Scheme ‘at odds’ with housing affordability
REINSW CEO Tim McKibbin has lamented the notion of introducing another tax on property at direct odds with the state government’s objective of improving housing affordability for first-home buyers.
“To make something more affordable, Government should apply less tax to it, not replace one bad tax with another. Approximately 40% of the cost a consumer pays for a new property is taxes and charges. Reducing the tax burden and addressing the lack of supply is the most appropriate place to start the discussion about improving affordability,” Mr McKibbin said.
“Until real measures are introduced to address the undersupply of housing, prices will remain out of reach for many aspiring first home buyers.
“Excessive taxation not only inhibits purchasers, it inhibits supply, and today’s market is the result of decades of inertia when it comes to property taxation reform.
Tim McKibbin, REINSW CEO
Mr McKibbin noted that tax brackets for stamp duty have not changed since 1986 – before most first home buyers were even born – and have not been adjusted for CPI during this time.
“It means more and more properties are subject to higher rates. The NSW Government collected over $14.5 billion in stamp duty for the financial year ended 30 June 2022,” he added.
What are the alternatives to stamp duty for first home buyers?
Mr McKibbin fundamentally believes that tax should be a consequence of a transaction, not a consideration. This means that stamp duty is a significant imposition and therefore a serious consideration for people contemplating a property transaction.
“The irony in the stamp duty debate is that there’s empirical evidence demonstrating that by reducing the rate of tax, more transactions will flow and the Government will actually receive more tax revenue,” Mr McKibbin said.
In terms of solutions, Mr McKibbin said the institute has outlined a range of solutions to assist first home buyers, such as exemptions from stamp duty to better compete with other purchasers and providing stamp duty relief for empty nesters, to encourage downsizing and freeing up larger homes for families.
In addition to taxation reform, Mr McKibbin reiterated the need for a much-improved DA process and clear development guidelines at a local level to improve supply, which would ultimately bolster affordable housing.
“But swapping one bad tax for another solves nothing, especially for first home buyers, he concluded.
