NSW First Home Buyer Stamp Duty reforms for properties up to $1.5 million

The NSW government has announced a proposed change that will allow first home buyers a choice between upfront stamp duty or an annual property tax, to help remove barriers to entry for first home buyers.

Who will be eligible?

Individuals who have not previously owned residential property in Australia and are over 18

What can you buy?

Property that is less than or equal to $1.5 million

What else do I need to do?

You must move in within 12 months of purchasing and live in the property for at least 6 months

When is this effective?

For contracts entered into from 16 January 2023 (note this is the date the contract is signed, not the date you move in)

Once the legislation is passed in late 2022 then contracts exchanged from that date will be eligible to apply for a rebate of their stamp duty and opt for annual property tax after 16/01/2023. You would still need the funds available to pay the stamp duty upfront at settlement.

How much is the annual tax?

While you live in the property it is $400 per year plus 0.3% of the land value*

If it becomes an investment property it is $1,500 per year plus 1.1% of the land value*

These amounts will index/change each year and increase over the time you own the property.

*Land value is not the same as property value and relates only to the portion of land. This may allow for significant savings if you are buying an apartment where your portion of the land is smaller.

What happens when I sell?

Whether you opt for annual property tax or one-off stamp duty, there is no continued impact on the next purchaser of your home.

What about the existing stamp duty exemptions and concessions for First Home Buyers?

These will continue to be offered so that properties up to $650k are exempt from stamp duty and properties up to $800k can receive a partial reduction in the stamp duty.

Should I choose the annual property tax or stamp duty?

This will depend on the value of the land you are looking to purchase, how long you expect to live there, and if you intend to use it as your own home or an investment to establish if you are better off paying the upfront cost or annual tax.

If you are buying an apartment to live in for up to 5 years you may be better off under the annual tax. If you are buying a house and plan to own it for many years then if you have the funds available you may be better off to still pay the stamp duty at settlement.

If you opt for the annual tax then ensure this is factored into your ongoing costs along with your mortgage repayments.

Where can I get more information?

https://www.nsw.gov.au/initiative/first-home-buyer-choice