NSW first-home buyers wave goodbye to stamp duty

January 17, 2023

Stamp duty is now a thing of the past for New South Wales' first-home buyers (FHBs) - or almost.

From January 16, 2023, the NSW government is giving FHBs a choice between paying one-off stamp duty or paying a (possibly) smaller, annual, ongoing property tax.

Sound too good to be true?

We give you the ins and outs of the First Home Buyer Choice scheme.

How did the First Home Buyer Choice begin?

Firstly, property buyers have long since regarded stamp duty - a government tax - as a major extra financial pain when purchasing property.

This is especially the case now when property prices are rising along with eight consecutive cash rate rises in 2022.

However, the NSW government last year suggested an alternative to stamp duty for eligible FHBs - the First Home Buyer Choice.

In what could be the first step in phasing out stamp duty permanently for all property buyers, NSW Parliament passed the long-awaited legislation on November 11, 2022.

The NSW government has now allocated $728.6 million over the next four years to the scheme.

What is the First Home Buyer Choice?

Available from January 16, 2023, the scheme gives FHBs purchasing a property of $1.5 million or under a choice between paying:

  1. a one-off, upfront lump stamp duty sum or 
  2. a potentially smaller, ongoing property tax, equal to $400 plus 0.3% of the property's land value 
    This tax needs to be paid annually or quarterly, much like council rates

FHBs buying vacant land of $800,000 and under are also eligible for the scheme.

As well, while the scheme applies to FHBs buying from January 16, it can also assist FHBs who signed a contract, or settled on, a property between November 11, 2022 and January 15, 2023.

The former group can decide to take up the ongoing property tax option while the latter can apply for a retrospective reassessment and a stamp duty refund.

Existing FHB stamp duty exemptions and concessions will also continue to apply for eligible purchases of up to $800,000. 

NSW first-home buyers wave goodbye to stamp duty
Available from January 16, 2023, FHBs purchasing a property of $1.5 million or under have a choice between paying a one-off, upfront lump stamp duty sum or a potentially smaller, ongoing property tax.

What should I choose: stamp duty or property tax?

In short, it's up to you and your financial situation.

Most real estate commentators are opting for FHBs to pay the ongoing annual property tax rather than the one-off stamp duty option, as the latter can be larger.

As someone currently house-hunting (although I'm not in NSW), I thought I'd try both options via the State Government's online calculator, and here's what I found.

To purchase a property of around $1.2 million (Sydney's median house value) with the plan to keep it for around 20 years, an ongoing, annual property tax would set me back around $30,000 in present value terms.

In comparison, the on-off stamp duty option would see me pay around $50,000.

If I kept the same house only 10 years before selling it or moving on, I'd only pay $17,000 in property tax; but $50,000 would still be needed if I chose the stamp duty idea.

Is stamp duty or property tax best for me?

Basically, the longer you plan to stay in your new property, the more stamp duty will work for you.

Stamp duty is also a one-off payment as opposed to property tax.

At the same time, property tax often works out to be cheaper than stamp duty, as we've shown.

Most importantly, however, paying property tax negates the major issue of needing to save up for stamp duty at the start of your property journey - along with all the other costs of buying a property.

And don't forget ....

NSW's original First Home Buyer Assistance Scheme is still available - although FHBs will have to choose between the two.

So, consider if this idea suits you better, or at least, just as well:

  • Existing homes of $650,000 or less - no stamp duty
  • Existing homes of $650,000-$800,000 - concessional stamp duty
  • New homes of $650,000 or less - no stamp duty
  • New homes of $650,000-$800,000 - concessional stamp duty 
  • Vacant land of $350,000 or less - no stamp duty
  • Vacant land of $350,000-$450,000 - concessional stamp duty

We’re here to help

We're always happy to help with all the dramas and stressors of house buying and selling.

And if you're particularly tired of house-hunting, we've even partnered with buyer advocates who can check out homes for you and organise sales assessments and negotiations.

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