From Monday 16 January 2023, many looking to buy their first home in NSW can have the choice of paying stamp duty (an up-front, one-off lump sum) or an annual land tax.
In light of these NSW government’s proposed changes to the property tax system (i.e. stamp duty), we’ve put together a quick Q&A to help first time home buyers understand what could change for the better when it comes to paying stamp duty.
Firstly, what is stamp duty?
As you may already know, stamp duty is a tax charged by state and territory governments on property purchases, which is paid at the time of purchase and is usually capitalised on to your mortgage.
How much is stamp duty?
While stamp duty varies depending on the location and the value of your property, currently in New South Wales, for a home priced between $313,000 and $1.04m, the rate is $9,390, plus $4.50 for every $100 over $313,000. For example, the stamp duty on a $750,000 home would be $29,055.
What did the NSW government announce and why?
The government announced that first time buyers purchasing a home in NSW up to the value of $1.5 million will have the choice to either pay stamp duty up front or opt into an annual property tax.
What does the proposed change mean for first home buyers in NSW?
The reform is essentially designed to lower the barriers to owning a home in NSW for first home buyers seeking a place of their own. Eligible first home buyers who sign a contract of purchase on or after 16 January 2023 will have the choice to pay stamp duty up front or opt into paying an annual property tax. You must move into the property within 12 months of purchase and live in it continuously for at least 6 months.
How much is the annual property tax?
If first home buyers decide to opt for the annual property tax as opposed to paying stamp duty upfront, they will pay $400 plus 0.3 per cent of the land value per year. The NSW government has estimated that about 97% of first homebuyers in the state, or around 55,000 people per year, will be eligible.
When will the change come into effect?
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.
It should also be noted that the Government intends that legislation to establish the property tax scheme will be introduced into the NSW Parliament during the second half of 2022.
Here’s an example of how a young couple buying their first home could take advantage of the stamp duty reform
- Steve and Jessica are buying their first home, a Freedom by Metricon home for $650,000 with a land value of $340,000.
- Ordinarily, stamp duty on a $650,000 home would be $24,555, but because Steve and Jessica are first home buyers, they are exempt from stamp duty and therefore do not choose the property tax.
You can find out more about the stamp duty reform and eligibility criteria here, or get in touch with our team to discover how we can help.
Find out more about stamp duty in your home State here.