Details have finally emerged about the new stamp duty deferral scheme for NSW first home buyers, set to launch in 2023 – and it could be a game changer!
Eligible first home buyers will be able to elect to not pay any stamp duty on a purchase of a property up to $1.5 million. If they make this election they will have to pay an annual ‘property tax’ of $400 plus 0.3 per cent of land value for properties.
So, the ‘property tax’ is a bit of a misnomer, it’s more of a ‘land tax’, payable throughout the whole time the person owns the property. The following calculation is provided on the NSW Revenue’s website:
Ranit is buying his first home, a $1.2 million townhouse in Newcastle. The land value of this property is $720,000.
Stamp duty on this purchase is $50,875, and the purchase price is above the threshold for any first home buyer stamp duty concessions.
In 2022-23, property tax on the property would be $2,560.
Ranit is not sure how long he will own the property, but he has heard that half of all owner-occupiers sell their property within about ten years.
Not having to pay stamp duty would really help to lower the up-front costs of the purchase, so Ranit chooses the property tax.
Note however, that if the buyer chooses to subsequently rent the property out, the property tax increases significantly to $1,500 each year plus 1.1 per cent of land value.
The really exciting news, which is different from the first draft of the proposal, is that owners will not have pay out the lifetime property tax when they sell. Incoming buyers get a 'clean slate' in terms of choosing whether or not to pay stamp duty on the property or (if they are first home buyers) pay the annual property tax.
Describing the objects of the initiative, the NSW Revenue have said:
This initiative will lower the up-front costs of home purchases and help to boost the rate of home ownership in NSW. With rising home prices, home ownership has declined from around 70 per cent in the 1990s to around 64 per cent today. The decline in home ownership has been particularly evident among younger and lower income groups.
The scheme is due to start on 16 January 2023.