The First Home Buyer Choice is a NSW Government scheme announced in the 2022-23 NSW Budget, designed to lower barriers to owning a home for first home buyers. The scheme aims to lower the up-front costs of home purchases by allowing the first home buyer the choice to pay an annual property tax instead of stamp duty.
It is estimated that this may cut up to two years off the time needed by many first home buyers to save for a home. Existing stamp duty concessions for first home buyers are still available for purchases of up to $800,000 but the new initiative is available for properties up to $1.5 million and will therefore assist a broader group in total.
How does it work and who is eligible?
To be eligible for the First Home Buyer Choice scheme you must be an individual (not a company or trust) and you or at least one person you’re buying with, must be an Australian citizen or permanent resident and over 18 years of age. Additionally, you or your spouse must not have previously owned or co-owned residential property in Australia or received a First Home Buyer Grant or duty concession. As per other First Home Buyer schemes, you must move into the property within 12 months of purchase and live in it continuously for at least 6 months.
If eligible and choosing to pay an annual property tax, rates will be based on the unimproved land value of the purchased property and will be indexed each year in accordance with average incomes. Property tax assessments will be issued in respect of financial years and if owned for less than a complete financial year, will be adjusted based on the number of days in the year that the property was owned.
If first home buyers do choose to opt-in to the scheme, owner occupiers will pay an annual tax of $400 plus 0.3% of the value of the property.
The payment of property tax is only available to first home buyers. If an individual is buying a property from someone who is paying property tax, but are not themselves a first home buyer, then they will pay stamp duty as normal and not be subject to the property tax associated with the home.
The legislation to establish the property tax is being introduced to parliament in the second half of 2022, and the government anticipates that it will be available on or after 16 January 2023. For eligible buyers signing a contract in between this period (ie from now up to 15 January 2023) they will be required to pay the current stamp duty charges but will be able to apply for a refund of that duty once the legislation is enacted.
When assessing your suitability for this scheme, it might be a good idea to find out if you’re eligible for any other stamp duty exemptions or concessions. This scheme however, may be more cost effective for you than paying a larger one off stamp duty tax, especially if you only intend to live in the property for a few years.
More information on the First Home Buyer Choice can be obtained from the NSW Government website or phone Service NSW on 13 77 88, or discuss it with your conveyancer.