NSW govt spruik '63-year' land tax benefit

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Optional land tax will help first-home buyers purchase property sooner and save them money over the time they're expected to stay in the property, the NSW government says.

Some could live in their property for 63 years and still pay less than they would for upfront stamp duty, NSW Treasury analysis says.

That figure is for a first-home buyer buying a $1.5 million unit, the maximum eligible price.

More realistically, "under reasonable assumptions", the Treasury analysis still shows those who opt for annual land tax will save money for more than 20 years.

Premier Dominic Perrottet wants to start a trial in January of an optional land tax for first-home buyers.

It would allow them to avoid the high cost of stamp duty, and the property would not be locked into the tax if sold.

Legislation creating the scheme has passed parliament's lower house but is subject to an inquiry before the upper house votes.

Treasury's inquiry submission notes the scheme "is not expected to have any noticeable effect on home prices, but it is expected to increase home ownership".

It favours owner-occupiers over investors and removes the stamp duty "deposit barrier", allowing first homebuyers to purchase sooner, Treasury said.

Mr Perrottet blames Labor for the inquiry delaying the bill's passage.

"Stop blocking the opportunity for young people to get into their very first home," he said on Monday.

Labor has criticised the proposal and called for it to be delayed until after the election, pleading with the cross bench not to support the bill.

"We're not going to support land tax in NSW," Opposition Leader Chris Minns reaffirmed on Monday.

He has not revealed plans if the trial begins in January and his party is elected in March.

"If it does pass, we'll have to cross that bridge when we come to it," Mr Minns said.

The scheme will place a "forever tax" on the family home and cost the government revenue, Labor says.

"What we're seeing from Labor is a scare campaign based on lies," Mr Perrottet said.

The scheme made sense and would benefit first-home buyers, he said.

Purchasers would pay land tax on an $800,000 unit for 36 years before it cost them more than stamp duty.

A $1 million townhouse would have buyers ahead for 28 years, and a $1.25 million house for 26, Treasury says.

Its calculations have tax rates indexed to grow at the same rate as gross state product per capita (3.2 per cent annually in the 15 years to June 2021).

The analysis uses an average 5.6 per cent mortgage rate, taken from the same 15-year period, and assumes different land values for houses (60 per cent), townhouses (50 per cent) and units (35 per cent).

Prior analysis showed half of all owner-occupiers sell their property within 10.5 years and about two-thirds within 20.

Stamp duty exemptions and concessions available for first-home buyers purchasing homes under $800,000 will continue.

Mr Minns said about 85 per cent of first-home buyers already benefited from the existing concessions.

"They won't be going on this land tax merry-go-round in the first place," he said.

The NSW Tenants Union supports land taxes, with chief executive Leo Patterson Ross last week telling the upper house inquiry it discourages land-banking and intentionally vacant properties.

McKell Institute chief executive Michael Buckland said all homebuyers should be offered the land tax option, then the property should be locked into the tax to gradually transition all homes.

The committee is expected to report on its inquiry by Friday.


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