The NSW first home buyer property tax option has arrived

Tax

25 Jan

Written By Julia Roberts

Last reviewed January 2023

From 16 January 2023, the first home buyer property tax option will enable first home buyers to choose between paying:

an upfront stamp duty, or
an annual property tax – First Home Buyer Choice (property tax).

This provides First Home Buyers with an alternative option to paying stamp duty up front, which has often provided a barrier to young people entering the home ownership market.

Annual property tax option

First home buyer owner–occupiers who opt into the property tax will be charged at a rate made up of a fixed amount of $400 plus 0.3% of the unimproved land value of the property. These rates remain in place for each year the first home buyer remains an owner–occupier.

In the years following a first home purchase, the property tax will be increased in line with the Valuer Generals assessment of the unimproved land value. This increase will be capped at 4% per annum. If you choose the annual property tax option, you will be issued a property tax assessment each year.

Property criteria

The property tax option will be available to first home buyers on purchases of up to $1.5 million or $800,000 in the case of vacant land.

Unlike the current stamp duty concessions for first home buyers, there is no requirement that the property is part of a new build.

Primary production land is also eligible, but business premises and holiday homes are not.

Personal criteria

The first home buyers must be individuals. Companies and trusts are ineligible for the annual property tax. For you to be eligible, you must:

be 18 years or older
not have previously owned residential property in Australia or received a first home buyer grant and duty concession (including your spouse or co-purchaser)
be an Australian citizen or permanent resident. If there are 2 owners, at least 1 person must satisfy this requirement, and
live in the property as your principal place of residence for a continuous period of at least 6 months, commencing within 12 months of buying.

What if I moved out of my fist home?

If you opt-in to the annual property tax, the first home you purchase does not need to remain your principal place of residence forever. As long as you satisfy the initial residence requirement, you can choose to change the status of your property from owner-occupier to investor at a later point in time.

As an investor, your tax rate changes for the annual property tax to $1,500 plus 1.1% of the property's unimproved value. The increase in annual property tax will include NSW land tax, that is generally payable by owners of investment properties.

What if I choose to pay stamp duty?

First home buyers who choose to pay stamp duty upfront can still get access to the other stamp duty concessions available in NSW.

Under the current scheme, NSW stamp duty is exempt for:

purchase of new homes valued less than $600,000, and
comprehensive home building contracts (or owner builders) where the house and land is valued less than $750,000.

Am I still eligible if I buy the property with my parents?

If you own 50% or more of the property you can still be eligible for the First Home Buyers Choice property tax. In this case, the parents would need to pay lump sum stamp duty on their portion. This arrangement does not apply if you purchase a property with your spouse and they are not eligible for the scheme.

Next Steps

Please let us know if you would like more information about the NSW annual property tax for first home buyers. AKW would be delighted to help you by providing further advice, including detailed calculations if you need them.

More details including Frequently Asked Questions are available from the Office of State revenue website here https://www.revenue.nsw.gov.au/grants-schemes/first-home-buyer/first-home-buyer-choice

KNOW MORE. DO MORE.