First home buyers in NSW will now have the choice of making an up-front stamp duty payment or opting into an annual property tax.
The choice will initially be made to first-home buyers purchasing a property up-to $1,500,000, for both owner occupiers and investment properties.
Whilst the scheme will be available from January 16, 2023, eligible first home buyers who sign a contract between 12 November 2022 and 15 January 2023 will be eligible to opt into the property tax. However, these purchasers will be required to pay any applicable stamp duty within the usual required periods and from 16 January 2023, will be able to apply for and receive a refund of that duty.
Existing Stamp Duty concessions for first-home buyers are available for purchases of up to $800,000, and these concessions will continue. The property tax option will be available for properties for up to $1,500,000.
How does this compare to existing stamp duty?
Normal stamp duty payable on a house purchase for $1,000,000
$40,305
Proposed stamp duty payable on a house purchase for $1,000,000 with $800,000 land value
$400 Initial duty
$2,400 p.a. Land tax payable on $800,000 at 0.30% p.a.
If we do some basic maths and multiply this by 16.5 this equates to $39,600, which is basically the lump sum amount that is due at settlement via the existing scheme.
Therefore, first-home buyers will generally be better off under the new proposed stamp duty changes if they hold the property for a minimum period of around 15-18 years. This will depend on the assessed land value of the property with unit purchasers having a clear advantage.