As part of the 2022-2023 NSW Budget, the Government announced a new $2.8 billion housing package to benefit first home buyers, regional residents and communities across New South Wales.

This included $728.6 million over four years to introduce an option for first home buyers; as of 16 January 2023, first home buyers will have the choice to pay either the one-off lump sum tax (ie stamp duty) or an annual land tax when purchasing a home up to the value of $1.5 million.

Touted as one of the biggest policy reforms to the housing sector in years, the ‘First Home Buyer Choice’ aims to make it easier for people to get onto the property market quicker; according the NSW government, for an NSW household on the median income that saves 15 per cent of its income, stamp duty adds about two years to the time required to save the up-front costs of the median NSW dwelling.

Some experts think replacing stamp duty with the option to pay an annual land tax reduces barriers for people to move to a different town or city to pursue better job opportunities. For example, often better employment opportunities exist in larger centres, but the cost of housing in such areas can be prohibitive for workers to relocate.

At the other end of the scale, older home owners may want to downsize their home to free up money to use in retirement, but for stamp duty may make this a costly option for some people.

Here are some more details and considerations about the First Home Buyer Choice:

What is the ‘First Home Buyer Choice

This property tax option will be available for properties up to $1.5 million.

Together with existing first home-buyer initiatives, the Government will offer support to about 97 per cent of all first home buyers, or about 55,000 people per year.

Under the initiative, first home buyers who opt into the property tax will pay an annual $400 property tax plus 0.3 per cent of the land value of the property.

The finer details

Legislation to establish the property tax will be introduced during the second half of 2022 with eligible first home buyers able to apply to opt into the property tax from 16 January 2023.

For contracts exchanged in the period between enactment of the legislation and 15 January 2023, eligible first home buyers will be able to opt-in from 16 January 2023 and receive a refund of stamp duty already paid.

From 16 January 2023, eligible first home buyers who opt into the First Home Buyer Choice will not pay stamp duty on their purchase.

The property will not be locked into the scheme if it is sold.

What about other stamp duty exemptions?

First home buyers will continue to be eligible to apply for full stamp duty exemption for properties up to $650,000. Stamp duty concessions remain in place for properties worth $650,000 to $800,000.

What do first home owners need to consider?

It’s worth bearing in mind, stamp duty is one of the major revenue streams for the NSW Government, and it still needs to have some revenue.

So, under this new scheme, instead of paying the stamp duty one-off lump sum, first home buyers will pay an amount each year, while they own that property, regardless of whether it is five years or 20.

While the aim is to make it easier for people to get into the market sooner, there is a chance that over the time, the homeowner could end up paying more than what they would’ve paid in stamp duty.

Do the changes affect existing home owners?

The changes do not affect existing home owners at the moment.

However, while Premier Mr Perrotet does want this policy to apply more widely, it can only be done with Commonwealth support to offset lost revenue for the state. This is estimated to be about $2.5 billion per year.

Before making any financial commitment on a property, we always recommend speaking to a qualified financial specialist who will advise on your options according to your financial situation.

If you’re thinking of selling, or would just like to know what your house could get in today’s market, contact us for a free, independent and non-obligatory quote. Our experienced team will also give you tips and ideas so you can get the best from your property.

We’d love to see you in our Cardiff office or you can give us a call on 02 4954 8833. Or send us an email to: mail@apnewcastle.com.au.

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