NSW Treasurer Matt Kean has taken to Twitter to spruik the popularity of the NSW Government’s alternative to stamp duty for first home buyers. The opt-in tax will replace the upfront cost of stamp duty in favour of a smaller yearly property fee.

On the first day of the new program, 164 buyers opted into the scheme. The tax regime is also back-dated to the 11th of November 2022 meaning anyone that purchased a property since then is eligible to opt in. 

Those that decide to go with the annual fee after having already paid stamp duty will receive a full refund. Four first-home buyers had applied for the refund and according to Kean, "two of them already received their refunds worth a combined $84,890 in their bank accounts."

This comes just days after Labor announced their long-awaited response to the government's controversial new tax that first saw light in the 2022 budget. Labor leader Chris Minns said that if they win government they would abolish stamp duty altogether for first-home buyers on any house purchase under $800,000.

Any purchase between $800,000 and $1 million would also receive a concessional rate which Minns claimed will result in "95% of first home buyers not paying any stamp duty at all or a reduced amount." This is up from the current threshold of $600,000 thousand.

The Liberal party remains the only party offering a carrot to those looking to purchase a property over the million-dollar mark. Their press conference kickstarting the legislation focused on this part of the electorate using the example of a first home buyer looking to purchase a $1.18 million home.

Liberal premier Dominic Perrottet said that the program "will significantly reduce upfront costs, reduce the time needed to save for a deposit and will see most first home buyers pay less tax overall."

For the Liberal Party, this first-home buyer rollout of the new tax is the start of a transition that will eventually see the property tax replacing stamp duty altogether.

A 2020 report by Prosper Australia claims that the new tax could have a serious impact on state coffers as the program is expanded. During the opt-in period - while stamp duty is being phased out - the budget will lose 1 in 3 tax dollars on 50% of properties totalling up to $1.14 billion dollars per year in lost tax revenue.

According to Prosper Australia this loss "will generate a massive revenue gap persisting for decades, and to maintain current spending will require a large and permanent increase in debt." The tax would need to be at least 1.6% up from its current 0.3% in order to remain debt-neutral over a 20-year period.

Labor's $722 million dollar program to raise the stamp duty-free threshold will have an impact on the state's bottom line but according to Prosper Australia, there is a fundamental difference between the two approaches.

Unlike stamp duty, the government does not recognise future land tax receipts as current revenue. So even if the same amount of tax was paid over time the government would still need to either cut spending in other areas like health and education or borrow more in order to cover the immediate shortfall.

The Real Estate Institute of Australia (REIA) has long argued for the reforms claiming that stamp duty is an inefficient and volatile tax that can fluctuate up to 50% year on year. Despite the short-term hit to the budget bottom line, REIA sees the transition to a land tax as a way to stabilise government revenue, increase the housing supply, and lower the upfront costs of property.

The ACT has already begun a 20-year transition to a land tax and South Australia has made some reforms in the commercial property sector but this move from NSW may see the national conversation around the replacement of stamp duty kicked into high gear.

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