As of 2 February, 18,700 new homeowners have claimed stamp duty grants since the NSW government’s First Home Buyers Assistance Scheme was expanded on 1 July 2023.
Stamp duty, also known as transfer duty, is an upfront cost paid to state or territory governments for buying a property.
Under the program, eligible first home buyers are exempted from paying land tax on properties worth under $800,000. Prior to this change, the threshold for exemption was $650,000.
The reform has resulted in an additional 13,800 buyers avoiding stamp duties of as much as $30,735.
Further, 4,600 took advantage of stamp duty discounts on eligible homes and lands between $800,000 and $1 million after the threshold on concession was also increased in mid-2023.
“We abolished the former government’s forever land tax and created a fairer assistance program that we can see is really helping people afford to get into Sydney’s property market and in the regions,”
“This scheme is part of a range of policies aimed at helping more people in NSW to own their own home," Treasurer Daniel Mookhey said.
The revised thresholds for first home buyers were a compromise after the Minns Government abolished the First Home Buyer Choice program established by the previous state government in 2023.
Under this scheme, first home buyers had the choice to pay stamp duty, or a land tax consisting of a yearly $400 fee plus 0.3% of their land value.
Mr Moohkey called this policy a "forever land tax", and the government scrapped it less than six months after it was rolled out.
Domain research at the time the Choice program was introduced estimated first home buyers would have been better off for up to 16 years (versus the old stamp duty thresholds) with land tax on a $1 million property purchase - below the median Sydney property price.
Stamp duty discourages Aussies from buying and moving
This news came a day before PropTrack revealed stamp duty costs home buyers up to six times more than it did in the 1980s.
The joint study by PropTrack and economic research firm e61 Institute found the surging costs of stamp duty have prevented people of all ages from buying homes or downsizing to a more suitable dwelling.
In Sydney, for instance, the study revealed stamp duty on a median-priced home is equivalent to $44,500 or six months of average full-time post-tax income. This is 5.4 times higher than it was in the early-to-mid 1980s when stamp duty was only around $1,500.
Melbourne buyers witnessed the biggest jump in transfer tax, as it is now 6.1 times more than it was four decades ago. Stamp duty in the Victoria capital is also equivalent to six months of full-time income or $42,500.
“Stamp duty is very costly. Home buyers in Sydney and Melbourne must spend half a year’s worth of full-time income, a burden that has increased enormously compared to a generation ago,” PropTrack senior economist Angus Moore said.
Although Brisbane imposes lower stamp duties, home buyers looking to enter the market still face higher costs – around $29,500 or equivalent to 3.7 months of income for an investor and $18,700 or 2.7 months of income for an owner-occupier.
Stamp duties on median-priced homes in Adelaide, Perth, and Hobart have also trended upwards over the past 40 years.
According to Mr Moore, home prices have outpaced income and stamp duty brackets have failed to keep up with them.
Because of stamp duty costs, one-quarter of Australians under 40 have delayed changing jobs, while one in five 30-year-olds has pushed back having a child.
Overall, the surging cost of this tax has prevented people of all ages from moving homes.
Recent findings by the Australian Housing and Urban Research Institute (AHURI) found high stamp duty cost is one of the reasons that discourage seniors from downsizing to smaller homes.
In Australian cities, research manager Dr Nick Gavin said stamp duty is deterring close to a quarter of potential downsizers.
“In a housing shortage, downsizing benefits everybody. The downsizers benefit from a better-suited home and everyone else benefits from the previously underused housing becoming available,” Dr Gavin said.
“Stamp duty is an inefficient tax because it discourages people from moving to homes that suit them,” Mr Moore added.
Aussie taxpayers want stamp duty abolished
The study found the majority of Australians want the stamp tax scrapped, with over a third of those surveyed selecting it as one of their top five choices for housing policies they wanted the government to make.
While everyone has to wait for such a policy to take effect, if it ever will, home buyers have to contend with stamp duty concessions and first home buyer grants available in other states including NSW.
Queensland has doubled its First Home Buyer Grant to $30,000 for properties with a dutiable value less than $750,000 until mid-2025.
First home buyers in South Australia get a $15,000 grant and are exempted from paying stamp duty for properties worth under $650,000.
Western Australia also offers up to 75% upfront discount on transfer tax for new apartments until June 2025.
Photo by HiveBoxx on Unsplash
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