As part of the 2022-23 Budget, the NSW Government announced that eligible first home buyers will have the choice of a smaller annual property payment (ongoing land tax) or a traditional upfront payment (stamp duty) for properties with a purchase price of up to $1.5 million.

Legislation recently introduced to parliament proposed first home buyers will be able to choose a $400 annual fee and 0.3% of the land value while it’s their primary residence instead of stamp duty, and the property is not locked into the tax if sold.

In a recent statement, Premier Dominic Perrottet said choice was central to this game-changing reform and will help put keys in the hands of more new home owners sooner by shaving years off the time it takes them to save for a deposit.

However, purchased property must fit certain requirements:

• Eligible properties include a house, townhouse, strata unit, company title unit, flat, duplex or a vacant block of residential land intended as the site of a first home.
• A property is not eligible if it includes a business or business premises or is the site of a holiday home.
• The value of the property (dwelling) you’re buying must not exceed $1.5 million. If you’re buying vacant land, it must not exceed the value of $800,000.
• You must move into the property within 12 months of purchase and live in it continuously for at least 6 months.

Calculating ongoing land tax

The First Home Buyer Choice initiative will lower the upfront costs of home purchases for first home buyers who choose to opt in.

You can use the First Home Buyer Choice Calculator to help you compare the estimated property tax (for the first year) and stamp duty.

Anyone can use the calculator, but you’re eligible for the First Home Buyer Choice initiative if:

• you’re an individual (not a company or trust) aged 18 or over
• you, or at least one person you’re buying with, are an Australian citizen or permanent resident
• you or your spouse have not previously:
  • owned or co-owned residential property in Australia
  • received a first home buyer grant or duty concessions

Which is better, land tax or stamp duty?

Treasurer Matt Kean said the First Home Buyer Choice calculator will help first home buyers decide for themselves which pathway to home ownership best suits their financial circumstances and personal aspirations.

“Treasury analysis indicates half of all owner-occupiers sell their home within 10.5 years, with first home buyers likely to sell even sooner. That means for the majority of first home buyers that don’t already receive stamp duty assistance, First Home Buyer Choice will not only allow them to break into the property market earlier, but pay less overall,” Mr Kean said.

To give you some guidance of how it can affect you, the Guardian Australia recently analysed a selection of properties currently on the market to show the differences in how the land tax could impact buyers.

One of the properties reviewed in the article is a three-bedroom townhouse in Newcastle. The analysis is as follows:

• Price: $850,000
• Stamp duty: $33,340
• Land tax in year one: $915
• Years until total land tax bill exceeds stamp duty: 27
• Total land tax bill if you sell after 25 years: $31,448

Read the Guardian Australia analysis on other properties here.

The calculator is provided as a tool only and what option is best for you will depend on your individual circumstances.

We strongly advise you seek independent financial advice about this new option before making any offers on a property.

When is the legislation being introduced

At time of writing, the First Home Buyer Choice states:

The Government intends that legislation to establish the property tax will be introduced into the NSW Parliament during the second half of 2022.

Eligible first home buyers who sign a contract of purchase on or after 16 January 2023 will be eligible to opt into the property tax and will not be required to pay stamp duty in order to complete their transaction.

Eligible first home buyers who sign a contract of purchase between the passage of the legislation and 15 January 2023 will be eligible to opt into the property tax. However, these purchasers will be required to pay any applicable stamp duty within the usual required periods and from 16 January 2023, will be able to apply for and receive a refund of that duty.

Information on how to apply for the property tax will be made available once the legislation is enacted.

Find out more about the First Home Buyer Choice here.

Our recent blog on land tax and stamp duty may also be of interest.

Whether you’re upsizing, downsizing or looking for a change in scene, if are thinking of selling your property, get in touch with us and we’ll come round and give you a free, independent and non-obligatory quote.

Call in and see us in the Cardiff office or give us a call on 02 4954 8833. Or send us an email to: mail@apnewcastle.com.au.

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