Changes to the NSW property tax system give first home buyers the choice between paying an annual property tax or up-front stamp duty when purchasing their first home.

First home buyers purchasing properties for up to $1.5 million now have the ability to choose to pay an annual property tax instead of paying up front stamp duty if they’re not otherwise eligible for existing stamp duty concessions. The changes will help a broader group become first home buyers particularly those paying more than $800,000 for their first home.

Eligibility

Only first home buyers are eligible to pay the property tax. All other purchasers must continue to pay stamp duty as normal. 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 owned or co-owned residential property in Australia or 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 11 November 2022

Existing Concessions

Existing stamp duty concessions for first home buyers for purchases of up to $800,000 will continue. Consequently, first home buyers of properties up to $650,000 will not pay any stamp duty and those purchasing properties between $650,000 and $800,000 can choose to pay either the current reduced concessional stamp duty amount or the property tax.

Calculation of Annual Property Tax

The annual property tax payments will be based on the land value of the purchased property. The property tax rates for 2022-23 and 2023-24 will be $400 plus 0.3 per cent of the property land value.
This tax rate 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.

Scheme commencement

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.

If you want to know more about First Home Buyer Choice or any Property Law issue or need advice or assistance with a property transaction please contact one of our accredited property law specialists, John Bateman or Michael Battersby on 02 4731 5899 or email property@batemanbattersby.com.au.