As part of the First Home Buyer Choice housing package announced in the 2022-23 New South Wales state budget, first-home buyers in NSW can choose either to pay stamp duty upfront or pay a smaller annual property tax.
NSW Premier Dominic Perrottet said it was a priority to make home ownership a reality for NSW families. He said, “In the past two decades, the share of first-home buyers under 35 years of age has declined from 67% to 61%. Lifting home ownership is part of this government’s efforts and ambition to help families who are feeling the squeeze.”
Removing the obligation to pay stamp duty up front could cut up to two years off the time first-home buyers need to save for a home.
More information will be available once the property tax legislation passes and comes into full effect in 2023. Visit homeloanexperts.com.au for updates.
When Will It Be Available?
The legislation to establish the property tax will be introduced into the NSW Parliament during the second half of 2022.
First-home buyers who sign a contract of purchase on or after 16 January 2023 can opt to pay property tax and will not be required to pay stamp duty.
If you signed a contract of purchase between the time the legislation passes and 15 January 2023, you cannot opt into the property tax. You will be required to pay any applicable stamp duty within the usual required periods and from 16 January 2023, you will be able to apply for and receive a refund of that duty.
What Is The Eligibility Criteria?
To be eligible to pay property tax in NSW:
- You must be an individual or a couple. Trusts and companies are not accepted.
- You must be over 18 years old
- For couples, at least one person must be either an Australian citizen or a permanent resident
- You or your spouse must not have previously owned or co-owned property in Australia.
- You or your spouse must not have received a First Home Buyer Grant or duty concessions in NSW.
- The value of the property you’re buying must be $1.5 million or less.
- You must move into the property within 12 months of purchase and live in it continuously for at least six months.
- You must sign the contract of purchase on or after the scheme begins in 2023
How Much Is The Property Tax?
The annual property tax payment will be based on the land value of the purchased property. The property tax rates for 2022-23 will be:
- $400 plus 0.3% of land value for properties whose owners live in them
- $1,500 plus 1.1% of land value for investment properties.
These tax rates will be indexed each year so that the average property tax payment rises in line with average incomes.
Property tax assessments will be issued in respect of financial years. For properties that are owned for less than a full financial year, a pro-rata adjustment will be made based on the number of days in the year the property was owned.
How Paying Property Tax Helps First-Home Buyers
- Many first-home buyers are buying properties that are too expensive to be eligible for the full stamp duty exemption and the high upfront cost of stamp duty is a major barrier to buying.
- Only one of the people buying a property needs to be a permanent resident or citizen. This makes sense, as this has often been a problem in the past in NSW and in other states. Couples with one person as a temporary resident have risked missing out on first-home benefits. It can take years for someone to obtain permanent residency and this sometimes delays their home buying decision.
- This is an attractive option for those buying apartments. An apartment has more building value and less land value, which means you would pay less in land tax.