Property Tax – First Home Buyer Choice – What is it?
by Caldwell Martin Cox | 13 02, 2023 | Latest News
You may have recently heard the recent announcement of the First Home Buyers Choice gain by the NSW State Government.
The existing First Home Buyers Scheme only applies for purchases of property of up to $800,000.00 in value. This will continue to apply. The new “First Home Buyers Choice” scheme will apply for residential properties being purchased by first home buyers with a value up to $1,500,000.00.
The recent announcement has introduced a choice for first home buyers (purchasing an eligible residential property that will be their principal place of residence) which is the option of:
a) Paying the usual stamp duty based on the dutiable value of the property, or
b) Paying an annual Property Tax based on the land value of the property.
The current Property Rax rates are:
a) $400.00 plus 0.3% of land value for properties whose owners live in them;
b) $1,500.00 plus 1.1% of land value for investment properties.
The tax rates will be indexed each year in line with average annual incomes. A provision has also been provided that the Property Tax on an individual property can never grow by more than 4% from one year to the next.
Any first homebuyers that have signed a contract to purchase a property from 11 November 2022 are able to opt into the Property Tax scheme. If a settlement is before 15 January 2023, they will need to pay the stamp duty and then apply for a refund. For any properties that have been purchased after 11 November 2022 with a settlement date after 16 January 2023, the stamp duty will not need to be paid if the purchaser opts into the Property Tax scheme. First homebuyers who signed an off the plan purchase contract on or after 11 November 2021 which settles after 11 November 2022 can also apply for the Property Tax scheme.
The NSW Government website provides a calculator for determining the stamp duty and Property Tax comparison (www.service.nsw.gov/transaction/calculate-your-property-tax) . On an example provided through that calculator with a purchase price of $1,249,000.00 (which has a land value of $476,000.00), the comparison between stamp duty and property tax is:
a) Property Tax is $1,828.00 per annum.
b) Stamp Duty is $52,895.00.
The upfront savings for a first homeowner are significant, but beware, the indexed property tax is payable throughout the duration of the ownership of the property. The longer you might plan on holding on to the property the more Property Tax you will ultimately pay.
First homeowners are encouraged to become familiar with the First Home Buyer Choice scheme for property tax and also other first homeowner benefit schemes available for properties of value of less than $800,000.00.
Knowledge is Power. Make an informed choice and speak with one of our Property experts today.