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Home Loan HandbookThe First Home Buyer Choice scheme, a NSW government initiative, allowed first homebuyers to choose between paying upfront stamp duty or an annual property tax. Launched on 11 November 2022, the scheme aimed to assist first home buyers in NSW in navigating the high property prices prevalent in the state. The option to pay an annual property tax instead of one-off stamp duty was offered to first home buyers purchasing homes valued up to $1.5 million or vacant land up to $800,000.
Existing stamp duty exemptions in NSW meant that some first home buyers were already eligible to pay zero or concessional stamp duty based on their property value. The introduction of the First Home Buyer Choice did not affect these existing stamp duty savings. The scheme was designed to eliminate the need for first home buyers to save for stamp duty, thereby facilitating their entry into the property market.
In a bid to provide relief to first home buyers, the NSW government increased the stamp duty exemption for first home buyers to $800,000 from $650,000, effective from July 1, 2024. This adjustment allows first home buyers to benefit from a full stamp duty exemption when purchasing a property valued up to $800,000 and concessional rates for properties up to $1,000,000.
Eligibility for the First Home Buyer Choice scheme was open to individuals over 18 years old who were Australian citizens or permanent residents and were purchasing their first residential property. The scheme excluded buyers who had previously owned residential property in Australia. To qualify, buyers had to move into the purchased property within 12 months of acquisition and reside there for at least six consecutive months.
Under the scheme, buyers who chose to forego upfront stamp duty would pay an annual property tax based on the land value of their property as determined by the NSW Valuer General. The tax rate was set at $400 plus 0.3% of the land value. This tax rate was subject to annual adjustments in line with average incomes, capped at a maximum increase of 4% annually.
To determine whether paying an annual property tax or stamp duty was more advantageous, an online calculator offered by Service NSW allowed prospective home buyers to assess their options. The calculator used the property address to ascertain the land value on which the property tax would be calculated.
While the First Home Buyer Choice scheme aimed to provide relief to first home buyers, there were scenarios where paying upfront stamp duty could be more cost-effective, especially when the property value was close to the stamp duty-free threshold. Negotiating the property price down and utilizing the First Home Buyer Choice calculator were recommended strategies to make an informed decision.
Although the scheme was expected to impact property prices in the short term, its long-term effects on the property market were uncertain. The Real Estate Institute of NSW highlighted the need for measures to address housing supply shortages, emphasizing that without such interventions, property prices would likely remain unattainable for many first home buyers.
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