Stamp duty opt-out scheme comes into effect in NSW
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As of January 16, first home buyers (FHBs) purchasing owner-occupier properties of up to $1.5 million (or vacant land of up to $800.000) will be able to opt out of paying stamp duty and instead pay a property tax under NSW’s First Home Buyer Choice initiative.
The regime aims to “lower the upfront costs of [a first home buyers’] purchase and cut up to two years off the time needed to save for a deposit, fast tracking [the] way to a new home”.
After having announced the new regime last year, the NSW government had been operating it in a transitional phase. Since 11 November 2022, eligible First Home Buyers who wanted to opt for property tax still had to pay stamp duty but could apply for a refund.
However, from today, eligible FHBs who sign a contract of purchase and opt into property tax will not have to pay stamp duty.
Instead, those who opt into the property tax will pay an annual property tax plus a percentage of the land value of the property.
The property tax rates for 2022–23 which can be paid in quarterly or annual instalments will be:
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$400 plus 0.3 per cent of land value for properties whose owners live in them; and
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$1,500 plus 1.1 per cent of land value for investment properties (this is only accessible if an FHB changes their residential purchase into an investment property).
These tax rates will be indexed each year so that the average property tax payment rises in line with average incomes.
The property will not be locked into the scheme if it is sold.
Home buyers must move into the property within 12 months of purchase and live in it continuously for at least six months.
It is expected that the property tax option will be taken up by around a third of eligible First Home Buyers.
A similar regime targeting stamp duty has also been proposed by the NSW Labor party, which recently announced it would ‘abolish’ and ‘reduce’ stamp duty for 95 per cent of FHBs if it wins the NSW state election in March.