First home buyers in NSW now have a choice between paying stamp duty or a smaller annual property tax.
The NSW Government’s First Home Buyer Choice scheme, legislated under the Property Tax (First Home Buyer Choice) Act 2022, came into effect on 16 January 2023.
There was also a transitional period between 11 November 2022 and 15 January 2023, during which eligible first home buyers have had to pay stamp duty but can apply for a refund of that duty after 16 January 2023.
The NSW Government’s stated aim with this scheme is to make it easier for first home buyers to enter the housing market by providing them with the choice of either paying a smaller annual property tax over time or instead paying an ‘up front’ lump sum amount of stamp duty.
You have to be an eligible first home buyer in NSW to access the scheme, meaning:
- you must be an individual (not a company or trust)
- you must be over 18 years old
- you, or at least one person you are buying with, must be an Australian citizen or permanent resident
- you or your spouse must not have previously owned or co-owned residential property in Australia, nor received a First Home Buyer Grant or duty concessions
- the property you are buying must be worth less than or equal to $1.5 million
- you must move into the property within 12 months of purchase and live in it continuously for at least six (6) months
- you must sign the contract of purchase on or after 11 November 2022.
For eligible first home buyers purchasing a property for up to $1.5 million, the First Home Buyer Choice scheme offers a lower upfront cost on the purchase and, according to the Government, may cut up to two (2) years off the time needed to save for a deposit.
In 2022-23 and 2023-24, annual property tax rates for owner-occupiers will be:
- $400 plus 0.3 per cent of the property’s land value (as determined by the NSW Valuer General); or
- $1500 plus 1.1% of that land value for investment properties.
The property tax rates will be annually indexed from 2024-25. The legislation also provides that the property tax on an individual property can’t increase by more than 4 per cent from one year to the next.
An online calculator is available to help calculate what amount is payable for either the stamp duty or the property tax alternatives for eligible applicants: https://www.service.nsw.gov.au/transaction/calculate-your-property-tax
Following the introduction of the scheme:
- Eligible first home buyers who sign a contract of purchase on or after 16 January 2023 and opt into property tax will not have to pay stamp duty.
- An application to choose property tax must be made before settlement.
- An application to choose property tax may be revoked by the applicant if the applicant makes an application to the Chief Commissioner for revocation before settlement.
- After settlement, a property cannot be opted into or out of property tax.
In the case of purchase contracts signed between 11 November 2022 and 15 January 2023:
- Eligible first home buyers who sign a contract of purchase between 11 November 2022 and 15 January 2023 will also be able to choose the property tax.
- Applications to choose the property tax can be made at any time between 16 January 2023 and 30 June 2023.
- If settlement occurs on or before 15 January 2023, stamp duty must be paid but then it will be possible to apply to Revenue NSW for a refund of the stamp duty from 16 January 2023. Once Revenue NSW processes the application, the decision to choose property tax cannot be changed.
- If settlement occurs on or after 16 January 2023 and the property tax option is chosen, stamp duty will not be payable.
In the case of off-the-plan purchase contracts signed on or after 11 November 2021 which settle on or after 11 November 2022:
- Eligibility to choose property tax depends on the legal date at which stamp duty liability arises.
- For properties that are purchased off-the-plan and used as a principal place of residence, liability for stamp duty arises at the earlier of (a) 12 months after the contract is signed or (b) when settlement occurs.
- First home buyers who signed an off-the-plan purchase contract on or after 11 November 2021 which settles on or after 11 November 2022 can apply for the property tax.
- For off-the-plan purchase contracts signed on or after 11 November 2021:
- If settlement occurs between 11 November 2022 and 15 January 2023, first home buyers will need to pay stamp duty and then they will be able to apply to Revenue NSW for a refund of the stamp duty. Applications to choose the property tax can be made between 16 January 2023 and 30 June 2023. Once Revenue NSW processes the application, the decision to choose property tax cannot be withdrawn.
- If settlement occurs on or after 16 January 2023 and first home buyers have chosen property tax, they will not need to pay stamp duty.
First home buyers who want to convert their home into an investment property at a later date can do so but must notify Revenue NSW that the property use it being changed.
The NSW Government says that first home buyers who have chosen to pay the property tax and then cannot afford to pay it will not be forced to sell their home to pay the property tax liability. Instead, the Government says that a ‘property tax deferral scheme’ will be available, permitting the payment to be deferred until the home owner’s financial situation changes or the property is sold.
Existing stamp duty exemptions and concessions for first home buyers will continue to apply for eligible purchases of up to $800,000.
Craddock Murray Neumann Lawyers has experienced and dedicated legal and conveyancing professionals, who can assist you with everything you will need to purchase a property, including first home buyer purchases. We can assist you with your choice of the stamp duty or property tax alternatives.
For more information on how our Property team can assist you, please contact us at craddock@craddock.com.au
