NSW has begun the task of winding back stamp duty.
State premier Dominic Perrottet has confirmed that first home buyers will have the option of opting out of stamp duty in favour of an annual property tax as part of the 2022-23 NSW budget aimed to improve housing affordability. From 16 January 2023, eligible first home buyers who opt into the First Home Buyer Choice will not pay stamp duty on their purchase.
The property tax option will be available for properties for up to $1.5 million. The property tax will cost $400 plus 0.3 per cent of the land value of the property annually.
The property will not be locked into the scheme if it is sold which is a deviation from the original design of the scheme that was released for public discussion. As such, if a buyer is purchasing a property from somebody who is paying the property tax, they will not automatically be subject to the property tax even if they are eligible to forgo stamp duty in favour of it, although future eligible purchasers can choose the property tax rather than paying stamp duty.
First home buyers will continue to be eligible to apply for full stamp duty exemption for properties up to $650,000. Stamp duty concessions remain in place for properties between $650,000 and $800,000. Purchasers who choose these concessions will not pay the new property tax. Those receiving the First Home Buyer Grant will not be eligible for the First Home Buyer Choice scheme.
All other purchasers must continue to pay stamp duty as normal.
Legislation to establish the property tax will be introduced during the second half of 2022 with eligible first home buyers able to apply to opt into the property tax from 16 January 2023.
For contracts exchanged in the period between enactment of the legislation and 15 January 2023, eligible first home buyers will be able to opt-in from 16 January 2023 and receive a refund of stamp duty already paid.
Premier Perrottet pointed to the decreasing rate of ownership amongst young first home buyers as the key factor in deciding to bring in these changes.
“We want to lower the barriers to owning a home for first home buyers seeking a place of their own,” Mr Perrottet said.
“In the past two decades, the share of first home buyers under 35 years of age has declined from 67 per cent to 61 per cent. Lifting home ownership is part of this Government’s efforts and ambition to help families who are feeling the squeeze.
“The First Home Buyer Choice will remove one of the largest upfront costs to buying a home and help deliver a brighter future for first home buyers.”
Along with the existing federal initiative, the First Home Loan Deposit Scheme, buyers in NSW can purchase a property up to $900,000 with a 5% deposit and opt out of paying Stamp Duty and also avoid LMI. That requires a deposit of $45,000. Compare that to only a couple of years ago where avoiding LMI (usually) required saving a 20% deposit. With Stamp Duty, purchasers would have needed a $215,000 deposit. These initiatives provide a real boost to first home buyers’ ability to step onto the property ladder.
The government gave the following scenario to demonstrate how the First Home Buyer Choice scheme could work:
