The NSW First Home Buyer Choice Scheme
First home buyers can now choose between paying an annual land tax instead of upfront stamp duty for properties worth up to $1.5m. This new scheme is called the First Home Buyer Choice scheme. This information is up to date at the time of publishing and details were taken from the NSW government website.
What are the changes?
Instead of needing to pay upfront stamp duty on the purchase of their first home, the government is providing first home buyers purchasing a new or existing home for up to $1.5 million the choice to pay an annual property tax.
A first home buyer purchasing vacant land up to $800,000 and intending to build a home on that land will also have the choice of either stamp duty or an annual property tax.
The First Home Buyer Choice Calculator can be used to calculate the difference between paying stamp duty or the annual land tax.
When do the changes come into effect?
The changes will officially take effect from 16 January 2023.
There is also a transitional period from 11 November 2022, when eligible first home buyers will have to pay stamp duty, but can then apply for a refund of the duty after 16 January 2023.
Contract of purchase signed on or after 16 January 2023
Eligible first home buyers who sign a contract of purchase on or after 16 January 2023 and opt into property tax will not have to pay stamp duty.
An application to choose property tax must be made before settlement.
A property cannot be opted into or out of property tax after settlement.
Transitional Period: Contract of purchase signed between 11 November 2022 and 15 January 2023
Eligible first home buyers who sign a contract of purchase between 11 November 2022 and 15 January 2023 will also be able to choose 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 will be able to apply to Revenue NSW for a refund of the stamp duty from 16 January 2023. Once Revenue NSW processes the application, the decision to choose property tax cannot be changed.
First Home Buyers that are thinking of buying during the transitional period do not need to do anything differently, but they can purchase knowing that from 16 January they can opt-into the First Home Buyer Choice.
Off-the-plan purchase contracts signed on or after 11 November 2021 which settle on or after 11 November 2022
Eligibility to choose property tax depends on the legal date at which stamp duty liability arises.
For properties that are purchased off-the-plan and used as a principal place of residence, liability for stamp duty arises at the earlier of
12 months after the contract is signed or
when settlement occurs.
First home buyers who signed an off-the-plan purchase contract on or after 11 November 2021 which settles on or after 11 November 2022 can apply for the property tax.
How will this impact purchase costs for first home buyers
How much this impact purchase costs for a first home buyer depends on the property price and the location of the property.
For example, for an apartment worth $1,000,000 in Surry Hills, Sydney:
Annual Property Tax: $1,154 (Payable annually, based on land value)
Property tax calculation method: $400 + 0.3% of land value
Annual tax rates will be subject to indexation
Land value: $251,098
Stamp Duty: $40,090 (Up-front payment)
Transfer (stamp) duty calculation method: $9,805 plus $4.50 for every $100 over $327,000 of purchase price
Purchase price: $1,000,000
Source: First Home Buyer Choice calculator
To understand how this scheme will impact your purchase, you can use the calculator below.
First Home Buyer Choice Calculator:
https://fhbcalculator.service.nsw.gov.au/
I’m interested in purchasing a home and under the First Home Buyer Choice scheme
Unbroke will be able to help you understand your options as a first home buyer. We are mortgage brokers, which means we have access to a panel of lenders, and our role is to help you find a loan that suits your needs.
Contact us today to talk about your requirements.
