The choice will initially be made to first-home buyers purchasing a property up-to $1,500,000, for both owner occupiers and investment properties.
Whilst the scheme will be available from January 16, 2023, eligible first home buyers who sign a contract between 12 November 2022 and 15 January 2023 will be eligible to opt into the property tax. However, these purchasers will be required to pay any applicable stamp duty within the usual required periods and from 16 January 2023, will be able to apply for and receive a refund of that duty.
Existing stamp duty concessions for first-home buyers are available for purchases of up to $800,000, and these concessions will continue. The property tax option will be available for properties for up to $1,500,000.
What do the changes to stamp duty mean for first home buyers?
Many looking to buy their first home will have the choice of paying stamp duty (an up-front, one-off lump sum) or an annual land tax.
The annual property tax payments will be based on the land value of the purchased property. The property tax rates for 2022-23 will be:
- $400 plus 0.3% of land value for properties whose owners live in them
- $1,500 plus 1.1% of land value for investment properties.
This choice will be available to first-home-owners purchasing a property under $1,500,000 with the aim of assisting buyers to access the property market quicker by not having to save to pay the stamp duty upfront as an upfront cost.
How does this compare to existing stamp duty?
If we do some basic maths and multiply this by 16.5, this equates to $39,600, which is basically the lump sum amount that is due at settlement via the existing scheme.
Therefore, first-home buyers will generally be better off under the new proposed stamp duty changes if they hold the property for a minimum period of around 15-18 years. This will depend on the assessed land value of the property with unit purchasers having a clear advantage.
Examples
Unit purchase in Castle hill for $750,000
The apartment has a land value of $270,000. An eligible first home buyer has the option of a concessional rate of stamp duty of $20,870, or an annual property tax of $1,210. Assuming that the same level of annual property tax continues, you will need to occupy the property for over 18 years to be worse off.
House purchase in Box Hill for $1,200,000
The House has a land value of $720,000. An eligible first home buyer has the option of stamp duty of $50,875, or an annual property tax of $2,560. Assuming that the same level of annual property tax continues, you will need to occupy the property for over 20 years to be worse off.
How do the proposed changes affect existing home owners?
The proposed policy only comes into play for first-home buyers. So, if you have already paid stamp duty in full, you won’t need to worry about the proposed changes.
Eligibility
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
- 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 the scheme commencement date (see below for details).
What happens when I sell the property?
Only first-home buyers are eligible to pay the property tax. All other purchasers must continue to pay stamp duty as normal.
If you are buying a property from somebody who is paying the property tax, you will not be subject to the property tax (unless you are also an eligible first home buyer and you choose to pay the property tax).
Further details can be viewed via the NSW Government’s website. Please contact our office to see if you can benefit from this scheme.
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