Legislation has passed parliament to give first home buyers in NSW a choice to forego hefty upfront stamp duty payments and instead pay an annual property tax. The Property Tax (First Home Buyer Choice) Bill 2022 was debated in the Upper House this week and given assent this morning, Friday 11 November 2022.
What does the new property tax offer?
From this weekend, first home buyers in NSW purchasing a property up to $1.5 million in value, can choose to pay an annual property tax instead of stamp duty. The property tax will be payable by the first home buyer but will not apply to subsequent purchasers of that same property (unless the purchaser is an eligible first home buyer who also chooses to pay the property tax).
Currently, the savings required to meet the upfront costs of a home purchase present a significant barrier for many first home buyers and the option to remove the stamp duty charge will help those buyers enter the market sooner.
Stamp duty concessions for first home buyers already exist for purchases up to $800,000 and these concessions will continue. The property tax option will be available for properties up to $1.5 million, to assist a broader group of first home buyers.
Who is eligible?
To be eligible for the annual property tax:
- 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.
- received a First Home Buyer Grant or duty concessions.
- the property you are buying must be worth $1.5 million or less;
- you must move into the property within 12 months of purchase and live in it continuously for at least 6 months;
- you must sign the contract of purchase on or after the scheme commencement date.
How does the property tax work?
Eligible buyers can now choose between paying a stamp duty based on the ‘dutiable value’ of the property or an annual property tax based on the unimproved value of the land.
The property tax rates for 2022-23 will be:
$400 plus 0.3 per cent of land value for properties whose owners live in them. $1,500 plus 1.1 per cent of land value for investment properties.
For the purchase of vacant land intended for the construction of a first home, the price cap will be up to $800,000.
These tax rates will be indexed each year, so that the average property tax payment rises in line with average incomes.
Property tax assessments will be issued for each financial year with a pro-rata adjustment made for properties that are owned for less than the full year.
The First Home Buyer Choice Calculator is available to provide an estimate of the property tax payment in the first year of ownership.
When will property tax start?
Eligible first home buyers who sign a contract of purchase after 16 January 2023 will be able to opt into the property tax scheme and will not be required to pay stamp duty to complete settlement.
In addition, eligible buyers who sign a contract of purchase between this weekend and 15 January 2023 can also opt into the property tax, although these buyers will be required to pay any applicable stamp duty upfront and then later apply for a refund.
Shared Equity Scheme
Under the shared equity scheme the government will contribute an equity share of up to 40 per cent for a new home or up to 30 per cent for an existing home, purchased by eligible key workers and low income households.
Source – NSW Government