First Home Buyers Choice: Can you get into the market earlier?

Housing affordability is a at an all-time low in Australia and many first home buyers particularly are struggling to save enough money for a deposit and the required stamp duty as the recent cost of living and interest rate increases start to bite.

One of the most significant stamp duty reforms in history has recently been passed in NSW in an attempt to address the issue of housing affordability. From 16 January 2023, eligible first home buyers will be able to choose between paying stamp duty on the purchase of their first property or pay an annual property tax based on the value of the home.  Under the scheme, the annual property tax is currently $400 plus 0.3% of the land value rather than the purchase price. However, first home buyers must move into the property within 12 months of completing the purchase and live in the property continuously for six (6) months.

The introduction of these changes by the NSW Government is intended to make it easier for first home buyers to enter the property market by significantly reducing the amount to be paid upfront and the amount they would have to save before being able to purchase a property.

Who is eligible?

To be eligible for the First Home Buyer’s Choice, you must be over the age of 18 years and you (and your spouse if purchasing a home together) have not owned or co-owned property before or received a first home buyer’s grant or concession.  At least one of the purchasers must also be an Australian citizen and the purchase price of the property can be no more than $1.5 million.

First Home Buyers who purchase a new or existing home under $650,000.00 can receive a full exemption from paying stamp duty. If the purchase price is between $650,000.00 and $800,000.00 there is a concessional rate of stamp duty to be paid.

If purchasing vacant land with the intention to build a first home, the purchase price is capped up to $800,000.00.

First home buyers purchasing a property as an investment can also opt in to pay property tax instead of stamp duty. However, the annual property tax rate is currently $1,500.00 plus 1.1% of the value of the property.

Click here to watch a short video made by the NSW Government that explains how the First Home Buyer’s Choice scheme will work and who is eligible.

When will the scheme come into place?

Eligible first home buyers who sign a contract on, or after, 16 January 2023 will have the choice of paying upfront stamp duty or an annual property tax based on the value of the property on settlement.

First home buyers who signed a contract between 11 November 2022 and 15 January 2023 will also be able to choose to opt in and pay the annual property tax and can make this choice any time between 16 January and 30 June 2023. If settlement occurs before 15 January 2023, they will need to pay the upfront stamp duty and can then apply for a refund of the amount paid.

Is it better to pay one-off stamp duty or an annual property tax?

The choice to opt in and pay an annual property tax instead of stamp duty will reduce the ‘upfront’ amount required to purchase a property significantly. For most couples or individuals, it will allow them to get a foot in the housing market much earlier.

As always, you should consider your personal financial situation when deciding which option is the best for you, factoring in how long you intend to stay in the home for example and what the total property tax might be. The NSW Government has developed a Property Tax Calculator  which is available on the Service NSW website for people to use and can help first home buyers to make the decision.

Speak to the RN LEGAL Property Team

If you are a first home buyer considering your options, speak to the property team at RN LEGAL for advice on whether you are eligible for First Home Buyers Choice and how it would apply to your transaction. We can guide you through the purchase process and ensure your property purchase runs smoothly.

Contact us today at (02) 9191 9293 or email us at mail@rnlegal.org.

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