First Home Buyer Choice ( Changes to the NSW property tax system )

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The NSW Government has announced that first home buyers purchasing properties for up to $1.5 million will be able to choose to pay an annual property tax instead of stamp duty. The property tax will only be payable by first home buyers who choose it, and will not apply to subsequent purchasers of a property. Legislation to establish the property tax has been enacted and received assent on 11 November 2022. Eligible first home buyers who sign a contract of purchase on or after 16 January 2023 will be able to opt into the property tax and will not be required to pay stamp duty, provided they choose to pay property tax before their purchase settles. Eligible first home buyers who sign a contract of purchase between 11 November 2022 and 15 January 2023 will also be able to opt into the property tax:

  • For this group, applications to choose the property tax can be made at any time between 16 January 2023 and 30 June 2023.
  • If settlement occurs on or before 15 January 2023, they will need to pay stamp duty, and then apply for a refund of the stamp duty after 16 January.
  • If settlement occurs on or after 16 January 2023, and they have chosen property tax, they will not need to pay stamp duty.

Information on how to apply for the property tax will be made available soon.  

Eligibility

  To be eligible:

  • you must be an individual (not a company or trust)
  • you must be over 18 years old
  • you, or at least one person you’re buying with, must be an Australian citizen or permanent resident
  • you or your spouse must not have previously:
  1. owned or co-owned residential property in Australia
  2. received a First Home Buyer Grant or duty concessions.
  • The property you are buying must be worth less than or equal to $1.5 million
  • 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 (see above for details).

Choice between stamp duty or property

If you are eligible, you can choose between (a) paying the usual amount of stamp duty based on the ‘dutiable value’ of your property; or (b) paying an annual property tax based on the unimproved land value of the property.

Existing first home buyer duty exemptions and concessions are not changing. There are no first home buyer stamp duty concessions for properties worth more than $800,000.

If the first home buyer is not eligible for a duty exemption or concession, the normal rates of stamp duty apply.

The annual property tax payments will be based on the land value of the purchased property. 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.

These tax rates will be indexed each year from 2024-25, so that the average indexed property tax payment rises in line with average annual incomes. In addition, the year-to-year growth of individual property tax payments are capped at a maximum of 4 per cent.

Property tax assessments will be issued in respect of financial years. For properties that are owned for less than a full financial year, a pro rata adjustment will be made based on the number of days in the year the property is owned.

For more information, please refer link to NSW Government website

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

Important: Clients should not act solely on the basis of the material contained in this newsletter. Items herein are general comments only and do not constitute or convey advice per se. Also changes in legislation may occur quickly. We therefore recommend that our formal advice be sought before acting in any of the areas. Client Alert is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our prior approval.


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