The upfront or lifelong mistake.
Don't make it.
Land Tax vs Stamp Duty for First Home Buyers.
First-home buyers in NSW can now choose between paying an annual land tax or an upfront stamp duty on their property, covering all properties bought by first-home buyers up to $1.5m.
Opting into a land tax? You will pay an annual levy of $400 plus a 0.3% tax on the value of your land, significantly lowering the upfront costs of purchasing a home, meaning:
It’s easier to save for a deposit (If you don’t have a guarantor)
Your borrowing capacity could potentially increase
The change in legislation was made in an attempt to combat declining levels of home ownership and rising property prices to “allow people to save more”.
NSW premier Dominic Perrottet stated, “For the first time, we will provide first home buyers with a choice, helping thousands of people to shave around two years off the time needed to save for a deposit”.
The major concern is that first-home buyers who opt into this reform become subject to permanent payment of land tax as long as they maintain ownership of their property.
But why is this a bad thing if it’ll take 23 years before reaching the value of Stamp Duty on a $1 million house?
Labour opposed the reform, labelling it a “forever tax” and a “trojan horse” created by the government, allowing future governments to “jack up the land tax rate” over time and leaving those who opted in with no choice but to pay.
What do you think? Trojan Horse or the best thing since this new newsletter?
Pros of opting in:
Lower upfront costs. It’s likely more manageable for you to pay significantly lower recurring tax than a hefty upfront fee
Lower deposit needed
Increased borrowing/buying capacity
Cons:
Locked into paying a yearly tax
Subject to further reform and increases to the tax in the future
The government has already mentioned that “tax rates will be indexed each year so that the average property tax payment rises in line with average incomes.”, which is on average a 3.2% yearly increase. Perrottet has promised that this yearly increase would not exceed 4% per year,
Could this be negatively manipulated in the future?
Remember when we were promised no interest rate hikes…