Stamp duty Reforms: The new First Home Buyer Scheme gives an alternative to Stamp Duty
The government has introduced a new Scheme as of 16 January 2023 allowing a First Home buyer to select the option of paying stamp duty on the transfer of land or an annual property tax.
Annual Property Tax:
This newly introduced option allows a first homeowner to pay $400 plus 0.3% of the land value each year for owner occupied properties, rather than an upfront lump sum stamp duty payment. Similarly, first home buyers who are purchasing an investment property will also be afforded the option to pay an annual tax at a higher rate of $1,500 plus 1.1% of the land value.
For example, consider buying your first owner occupied home in Sydney for $850,000 with a land value of $265,000. You have the choice of paying an upfront stamp duty of $32,440 or an annual property tax of $1,195. A person purchasing a home for $1,350,000 with a land value of $810,000 can pay $59,125 in stamp duty or the annual property tax of $2,830.
The option of annual property tax encourages First Home Buyers to enter the property market as it significantly reduces up-front costs and the time required to save for a deposit. Effectively, first-home buyers will be paying less tax overall as stamp duty can be considered a massive additional expense on top of the cost of purchasing a new home.
Eligibility of this Scheme:
You are eligible to participate in this scheme if you are:
Buying your first home in Australia;
An Australian citizen or a permanent resident; and
Over the age of 18 years old.
Additionally, the property must not exceed the purchase price of $1,500,000.00 along with the requirement that the new homeowner lives in the home for a minimum of six consecutive months with that occupation taking place within the first year after settlement. Further, this scheme extends to vacant land! If you purchase vacant land under $800,000 with intentions to build your home, you too have the choice between property tax or stamp duty.
Is property tax locked into the property forever?
The property tax will only be payable by first-home buyers who choose to exercise this option. If properties that were subject to property tax are sold, subsequent purchasers of the property are not locked into property tax. If the new owners are first-home buyers, they will have the option between paying annual land tax or stamp duty. Alternatively, if the new owners are not buying their first home, the standard stamp duty rates apply.
However, do note that once an option has been exercised, no provision allows you to change your mind once you have become the owner of the land.
How do you apply for the First Home Buyer Scheme?
The following two forms must be completed.
First Home Buyer Choice application form PDF, 1067.19 KB.
Purchaser/Transferee Declaration form (individual). PDF, 742.44 KB
To decide which option is best for your circumstances, consider using the First Home Choice calculator at the link below.
https://www.service.nsw.gov.au/transaction/calculate-your-property-tax
Do not forget about the First Home Byers Assistance Scheme that is still in place, providing an exemption to stamp duty for first home buyers on properties less than $650,000 and discounted rates of stamp duty for properties up to $800,000
If you are considering purchasing a home, do not hesitate to get in touch with Clare and the Team at Wainwright Legal. We are ready to assist you and make your first purchase a seamless experience.