NSW first home owners tax reform offers 25K grants
First home buyers in NSW could be given the gift of up to $25,000 towards their home purchase.
One-off grants of up to $25,000 could be handed out to first home buyers across the state as part of stamp-duty reform, NSW treasurer Dominic Perrottet has announced.
"While the reduction in home prices would take time to realise, and the actual magnitude would depend on the final policy choices of the government, a reduction in home prices in the order of 3-4 per cent could reasonably be expected," the report states.
This is music to the ears of first-time buyers in Sydney, where property prices are soaring and the prospect of saving a deposit to buy a home is seeming to get further out of reach for everyday Australians.
A grant of up to $25,000 and a moderation in house prices almost sounds too good to be true.
So what's the catch?
The new grant gives first home buyers a nice big jump start to their property deposit.
But there's no such thing as a free lunch – and in this instance, the $25k grant replaces the stamp-duty concession that buyers would have been eligible for previously.
Overall, most buyers will be better off as the grant may be eligible to be used as part of your deposit, which is a huge barrier to entry for many first home buyers.
It also benefits those who are shopping for higher-priced properties: first timers currently pay partial stamp duty on homes priced between $650,000 and full stamp duty above $800,000.
Note: from 1 August 2020, the scheme was temporarily boosted for 12 months, with no stamp duty payable on new homes priced up to $800,000 and a discount on those priced between $800,000 and $1m.
"The proposed new property tax system, which replaces stamp duty with a small, annual tax, would… stimulate home ownership, grow the economy and create jobs," Perrottet said.
"It is estimated that as a result of reform, more than 300,000 NSW residents could achieve their dream of home ownership."
Who is eligible for the new grant?
The grant is set to be offered to home buyers who are settling their first property.
If you have owned a property before, even as an investor rather than as a first home buyer, it is unlikely you will be eligible for the grant.
When would the new grant be available?
The details are still a little murky, as they're still being finalised. Stamp-duty reform in NSW remains an ongoing discussion (the NSW government continues to seek feedback on this policy through to Friday 30 July; you can email TaxReformTaskforce@treasury.nsw.gov.au or visit the Property Tax Reform page.)
However, after digging through the progress papers, we did find some useful information about how the grant will be rolled out:
- If the government proceeds with the reform, people who purchase between the date of that announcement and the commencement of the legislation would be eligible to opt-in to the new property tax or pay under the current upfront regime.
- When announced, the government would clearly state the dates during which the opt-in is available as well as eligibility criteria.
- People who purchase during this cross-over period will still be required to pay upfront stamp duty within the normal period (because the legislation hasn't passed yet).
- However, they would be able to receive a refund of the stamp duty paid upon lodgement of an application to opt-in to the property tax retrospectively.
At this stage, it's expected that the new tax regime would be rolled out in the second half of 2021.
What are the next steps?
While stamp-duty reform is still under consultation with the government, Perrottet said they will "continue to listen to the community and invite further feedback on the additional information contained in the Progress Paper over the coming weeks."
"The first round of consultation and submissions showed 84% of people believe stamp-duty reform is needed, and two-thirds of the community said stamp duty was a significant barrier to home ownership," Perrottet said.
"Making changes to the property tax system is highly complex and we want to make sure we get this right."
There are still many details to be confirmed and hashed out: for instance, the exact percentage rate that the new tax will be.
In the discussion papers, a rate of $400 per property for residential owners and $1,500 for investors is mentioned as an initial "fixed fee", with a percentage rate to be added to this.
The report also states the tax will be subject to ongoing indexation, rather than being pegged to land values.