Are you ready to be a first home owner in New South Wales? If so, we have the biggest stamp duty news for you: the First Home Buyer Choice Scheme might just help you purchase your dream home sooner!
With this scheme, you can now decide between paying for stamp duty or a smaller annual property tax NSW. Basically, it’s designed to help prospective buyers across NSW get their foot on the property ladder—but what do first time buyers need to know about this scheme?
Read along as we guide you through a step-by-step explanation of how it works – and why it might just be the perfect launchpad into homeownership!
What is the First Home Buyer Choice scheme and how does it work
The First Home Buyer Choice scheme is a NSW government initiative that lets first home buyers and property investors in the state choose between an annual NSW property tax or an upfront stamp duty payment.
It was launched in 11 November 2022 and took effect on 16 January 2023. It is described by premier Dominic Perrottet as a game-changing NSW stamp duty reform.
How it works is that the scheme offers first-time buyers, who purchase a home for up to $1.5 million or vacant land for $800,000, the alternative of paying a yearly property tax instead of a one-time stamp duty (first home buyers tax).
Basically, the scheme is the answer to the question of how to avoid stamp duty when buying a house in NSW! Good news, right?
The property tax can be paid either quarterly or annually, similar to council rates. It’s important to note that an NSW first home owner may already be eligible for zero stamp duty or a reduced rate, depending on the value of their first home.
But wait, when will stamp duty be abolished in NSW? Or is the NSW stamp duty abolished already?
Not necessarily, mate. Below is a table of the concessional stamp duty rates:
New Homes | Established Homes | Vacant Land | |
Home valued under $650,000 | Zero stamp duty | Zero stamp duty | Zero stamp duty |
Home valued between $650,000 and $800,000 | Zero to $31,207 | Zero to $31,207 | Zero to $24,340 |
Home valued between $800,000 and $1.5 million | $31,207 to $66,700 | $31,207 to $66,700 | $24,340 to $66,700 |
Source: NSW Office of State Revenue
Which is cheaper: Australian property tax or stamp duty?
On the get-go, opting in for the annual property tax instead of stamp duty is the obvious choice. It is significantly less expensive compared to the lump sum cost of stamp duty, which takes about a year or two to save up for.
Stamp duty is a one-time fee paid when purchasing a property and is based on the higher of the purchase price or market value. The recent stamp duty reforms have made it possible for first home buyers to not pay stamp duty for certain property price stamps.
Property tax, on the other hand, is an annual fee based on the land value of the property and varies for owner-occupied and investment properties. Here are the property tax rates for 2022-2023 and 2023-2024:
- $400 plus 0.3% of land value for properties whose owners live in them
- $1500 plus 1.1% of land value for investment properties.
However, complying with the annual property tax might be more expensive in the long term. It is best to seek advice from a mortgage broker to know which option is best for your circumstances.
Who is eligible for the scheme
To be eligible, you, or at least one person you’re purchasing property with, must:
- Be an individual (not a company or trust)
- Be over 18 years of age
- Be an Australian citizen or permanent resident
- Not have previously owned or co-owned a residential property in Australia
- Not have received a First Home Buyer Grant or stamp duty concession
- Buy a property equal to or less than $1.5 million
- Move into the property within 12 months of purchase and live in it for at least 6 consecutive months
- Sign the contract of purchase on or after 11 November 2022
Below are the requirements to apply for the First Home Buyer Choice scheme:
- property purchase price
- address for the property or estimated land value
- property usage (owner-occupied or investment)
- property details (property with a new or existing dwelling).
How to apply for the scheme
First-time homebuyers who enter into a contract between November 11, 2022, and January 15, 2023, are eligible to participate in the property tax program. They can submit their property tax choice from January 16, 2023, to June 30, 2023.
If the settlement occurs on or before January 15, 2023, the first-time homebuyers will be required to pay transfer duty and later apply for a transfer duty refund via an online portal on the Revenue NSW website starting January 16, 2023.
If the settlement takes place on or after January 16, 2023, and the first-time homebuyer has selected the property tax option, they will not have to pay transfer duty.
Ready to buy your first home in NSW?
All in all, the First Home Buyer Choice Scheme is a great way to get your foot on the property ladder in New South Wales.
As always, feel free to reach out to me if you’re ready to take the next step. As a mortgage broker for doctors, teachers, nurses, and not-for-profit workers, my team and I are passionate about helping people who spend their lives helping others.
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