Paying stamp duty on a property transaction in NSW is an area of government policy currently undergoing rapid change. We’ll look at these changes in a series of articles, beginning with the current state of play.
First Home Buyer Choice scheme – introduced but soon to be abolished
In November 2022 the former Perrottet government introduced the First Home Buyer Choice scheme (FHBC), allowing those getting into the property market to choose between either paying stamp duty in a lump sum, or paying an annual property tax on the property. The scheme’s aim was to reduce the initial cost of purchasing a property for a first home buyer by paying a tax calculated on the land value and paid each year of ownership, instead of the lager lump sum amount required by an upfront stamp duty payment.
Under the scheme first home buyers in NSW could choose to pay $400 plus 0.3 per cent of their property’s land value if they reside in the property (or $1,500 plus 1.1 per cent of land value for investment properties). The property tax option applied to properties up to the value of $1.5 million. Stamp duty exemptions remained, comprising a full exemption for homes valued up to $650,000, and a partial exemption for homes valued up to $800,000.
But with the election of the new Minns Labor government in March, further changes to stamp duty in NSW were announced. Crticising the FHBC as ‘a lifetime tax’ on the family home, the new government said it would instead rely on expanding stamp duty concessions to help first home buyers. From June 30 this year the new government proposes to abolish the FHBC. Instead, first home buyers will receive a full concession on properties up to $800,000 and a concessional rate for homes valued up to $1 million (believed to be about 50 per cent). The NSW Parliamentary Budget Office has estimated up to 95 per cent of all first home buyers will save money on stamp duty under the new rates.
Implications for home buyers
Those who have already opted in to the FHBC will have a grace period in which their arrangements remain the same. It’s also expected a window will remain open before the scheme is phased out in which new buyers can still make a choice between land tax and stamp duty. If not, those looking to buy a property up to $1.5million who had chosen the land tax option will not be required to pay the full stamp duty amount.
While the FHBC made it easier for first-home buyers to get into the market by reducing the overall amount needed for a deposit, it was also critiqued for potentially inflating property prices by artificially encouraging demand at a time of limited housing supply. The scheme also only applied to first home buyers and not other segments of the market such as existing homeowners and empty nesters.
Unsure? Speak with our property experts
In this period of transition between governments in NSW, where earlier schemes may be abolished and new rates of stamp duty on property transactions come into effect, the guidance of our property and conveyancing specialists at Felicio Law Firm can be vital. We can help clarify the issues involved, particularly if you have already opted in to the FHBC or want to choose to pay land tax before the scheme expires at the end of June. Contact us today for more detail on any of the issues raised in this post.
