First Home Buyer Choice: Stamp Duty or Annual Property Tax?
First Home Buyers (FHB) now have the choice to either pay their transfer duty (stamp duty) up front or to opt for an annual property tax. The annual property tax scheme is suitable for those who do not have the transfer duty funds available up front, or want to reduce the amount they need to borrow from the bank to buy a property.
Do I qualify?
You qualify for an annual property tax if you are a First Home Buyer, an Australian citizen/permanent resident and either purchase:
a new/existing home for $1.5 million or under, Or
a vacant land with the intention of building a home for $800,000 or less.
You intend to live in the home for at least six months starting from within 12 months of purchasing the property or if vacant land, building must have commenced on the land within 2 years.
When did this option start?
The new scheme commenced on 16 January 2023. If settlement occurred between 11 November 2022 and 15 January 2023, first home buyers can apply for a retrospective re-assessment and refund of the stamp duty paid.
How is the property tax calculated
The property tax rates are published every year and is subject to change. Once you opt into property tax you will have to pay the tax for the time you hold an interest in the property. You may opt to pay the tax quarterly or annually.
courtesy of Revenue NSW.
Which option will save me the most money?
The Annual Property tax would suit those home buyers who intend to hold onto the property for a short period of time. If you have found your ‘forever home’ it may be a cheaper option to pay the transfer duty upfront.
You should seek financial advice regarding this decision.
What if I move into the home for six months and then turn my property into an investment property?
You will need to notify Revenue NSW of the change of use of your property. Your property will then be subjected to an annual property tax rates for residential investment property.
The annual property tax on your investment property is not to be passed to your tenants. It is the responsibility of the owner.
What happens if I can’t meet the repayments?
If you cannot make the payments for the annual property tax and you fall into arrears a deferral scheme may be available.
Can I change my mind once I have chosen an option?
You cannot change your mind once you have committed to an option and the property has proceeded to settlement. In other words, you may not change your option into paying a transfer duty after you have become an owner of the property and have commenced paying annual property taxes.
Ardent Lawyers can assist you with buying your first home, and processing your application for stamp duty exemption, concession or the annual property tax.
For more information on the First Home Buyer Choice scheme, visit the FAQ Revenue NSW website page or contact our office on (02) 4444 6808.
