Stamp duty vs land tax - everything you need to know about NSW’s First Home Buyer Choice scheme

Stamp duty vs land tax - everything you need to know about NSW’s First Home Buyer Choice scheme

Eligible first home buyers in New South Wales can now choose to pay an annual property tax instead of transfer/stamp duty upfront under a new government scheme.

From 16 January 2023, first home buyers can opt to pay $400 plus 0.3% of their property’s land value annually under the NSW Government's first home buyer Choice scheme.

The scheme aims to reduce the upfront cost of buying property by giving first home buyers the choice between upfront transfer duty and the new ongoing property tax.

First home buyers who plan on using their property as an investment are required to pay $1500 + 1.1% of the property’s land value annually.

Eligible buyers who settled between 11 November 2022 and 15 January 2023 can apply for a stamp duty refund until 30 June 2023.

Properties valued up to $1.5 million are eligible for the scheme while vacant land can be valued up to $800,000.

Am I eligible for First Home Buyer Choice?

You will need to meet the following criteria to be eligible for First Home Buyer Choice, according to Revenue NSW:
Be an individual (not a company or trust) aged above 18

• Be an Australian citizen or permanent resident
• You (and the person you are purchasing with) have not owned or co-owned a residential property in Australia before
• Have not received a First Home Buyer Grant or duty concessions
• Signed a property contract from 11 November 2022 onwards

Land Tax or Transfer Duty - which is better?

Whether you should apply for the First Home Buyers Choice scheme depends on your personal circumstances.

Opting for a land tax could reduce upfront costs for those seeking to enter the property market, who take more than 10 years to save a 20% house deposit.

However, it is important to consider the long-term costs of an annual land tax, which will increase based on annual average wages from 2024 onwards.

Service NSW’s First Home Buyer Choice calculator can help you compare paying stamp duty or property tax.

What happens when you sell a house under the NSW first home buyer scheme?

The tax on properties subject to First Home Buyer Choice does not roll over when sold. If a first home buyer sells their property, normal stamp duty will apply to the next owner.

If the new purchaser is eligible for the scheme, they can opt to pay a monthly tax on the same property.

How do I get a refund on my stamp duty?

Anyone in NSW who bought a home after 11 November 2022 for $1.5 million or less can apply for a stamp duty refund by opting into the property tax.

A homebuyer could receive a $50,000 refund for the stamp duty paid on a median $1.2 million Sydney property, according to UNO’s stamp duty calculator.

The fee will be refunded within ten days, according to The Guardian.

The NSW Government expects over 6,5000 people to apply for a stamp duty refund annually.

Is First Home Buyer Choice the same as land tax?

Both First Home Buyer Choice and land tax are based on the value of your property’s land. However, in NSW land tax is not charged on your principal place of residence.

The FHBC scheme is also only available to eligible first home buyers.

What other concessions are NSW first home buyers entitled to?

First Home Owners in NSW may be eligible for a concession or exemption on transfer duty payable.

Homes valued under $650,000 are exempt from stamp duty under the NSW First Home Buyer Assist Scheme. Concessional rates apply to homes worth up to $800,000.

NSW also offers a $10,000 first home buyer’s grant to eligible buyers buying or building a new home.

Sources

‍www.revenue.nsw.gov.au/grants-schemes/first-home-buyer/first-home-buyer-choice

‍www.revenue.nsw.gov.au/grants-schemes/first-home-buyer/assistance-scheme

‍www.revenue.nsw.gov.au/grants-schemes/first-home-buyer/new-homes

‍www.9news.com.au/national/nsw-first-home-buyers-choice-when-it-starts-how-it-works-eligibility-explainer/