A new property tax coming for NSW

The NSW state government has released details of its much-anticipated revamping of NSW state taxes in the 2022–23 state budget. Originally released for consultation in November 2020, the government is introducing a new property tax for first home buyers who choose not to pay stamp duty.

First home buyer property tax

Beginning 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.

The main difference which exists for this announcement, compared to November 2020, is that only first home buyers will be eligible for the annual property tax.

Annual property tax option

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.

Notably, it is mentioned in the budget statement that the tax rates will be indexed over time by Gross State Product per capita, rather than land values, for subsequent years of ownership.

After selecting the annual property tax option, first home owner–occupiers are allowed to change the status of the property to an investment. Higher rates would apply, being $1,500 plus 1.1% of the property’s unimproved value, but this will replace NSW land tax.

Eligibility

The property tax option will be available to first home buyers on purchases of up to $1.5 million. There is also a living component of eligibility, where a first home buyer must live in the property for 6 of the first 12 months of ownership.

At this early stage, we are unsure on other specific details regarding individual eligibility, such as when only one of 2 members of a couple are first home buyers. Please let us know if you need to be alerted when this information comes to hand.

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.

Transitional arrangements

Eligible first home buyers who execute contracts in the period between enactment of the legislation and 15 January 2023 will obtain refunds of stamp duty already paid.

Please let us know if you need to receive further updates on this scheme as more and more information becomes available. We would be delighted to help you by providing further advice, including detailed calculations if you need them.

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