If you’re first-time home buyer looking to buy a home in New South Wales, you’re in luck. The property rules have just changed. And because of this, new home buyers in NSW are in a position to save off the normal upfront stamp duty cost by choosing an annual property tax payment instead.

Here’s what you need to know.

Annual property tax or upfront stamp duty?

Property costs have soared in NSW over the last few years, particularly in Sydney and other regional centers. In fact, Sydney prices rose 14% last year to a median of $543,000. And in the past 20 years, the percentage of first home buyers under 35 years old has fallen to 61% (from 67%).

The soaring property prices, and the falling access, are key factors that drove the NSW government to offer a stamp duty alternative. The government is keen to get more first home buyers into homes, and to open up the property ladder for the younger generation. And property reform – in the form of the First Home Buyers Choice – is an excellent way to achieve those ends.

So, what does the First Home Buyers Choice offer?

Stamp Duty

Traditionally stamp duty has always applied to mortgages and transfers of property. The amount of the tax depends on the type and value of your transaction. And it can amount to quite a large additional sum – especially for first home buyers. When combined with the other upfront costs related to home buying, this can be tricky to manage.

Stamp Duty Table

Here are the costs of upfront stamp duty.

Source: NSW Government – Revenue

Annual Property Tax

In order to facilitate the goal of helping more property buyers, the NSW announced plans to offer an annual land tax payment in lieu of an upfront stamp duty payment. The new plan came into effect earlier this month. And it now means that if you are buying a home in NSW you have a choice to pay the regular lump sum upfront stamp duty or to pay an annual property tax.

There are some limitations of course. The property may only be valued up to $1.5 million. And the amount that you will be required to pay is based on the land value of the property. The property tax will also increase over time in line with increases of incomes across New South Wales.

Property Tax Table

The property tax rates for 2022-23 will be:

Type of premises	Property tax rate
Owner-occupier	$400 + 0.3% of land value
Investment	$1,500 + 1.1% of land value

Who is eligible?

The First Home Buyers Choice is available to all permanent residents who are buying a home in NSW. But if you’ve already received the First Home Buyer Grant or other stamp duty concessions, you won’t be eligible to defer your stamp duty.

You also need to:

• Be an individual (not a trust or company)
• Be over 18 years old
• Not previously owned or co-owned a residential property in Australia
• Property must be under $1.5 million
• You must occupy the home within 12 months of purchase and live there continuously for at least six months

Property tax or stamp duty? What’s best for you?

When it comes to choosing property tax or stamp duty, it’s a good idea to run the numbers and see what gives you the best results. Take a look at the First Home Buyers Choice calculator to see what your options are. This tool will give you an estimate of property tax payments for up to 75 years of ownership.

It’s important to recognise that the savings you can make from choosing an annual property tax over an upfront stamp duty payment will lessen the longer you hold the property. Imagine you bought a $1 million property in 2023. It would only take you around 15 years to surpass the amount you will have paid in stamp duty in annual property taxes. From then on, any additional payment would be a cost over the lump sum.

What if I’ve already paid stamp duty but could have been eligible for annual property tax?

If you’ve bought a property after the Property Tax (First Home Buyer Choice) Act 60 of 2022 bill (the First Home Buyers Choice bill) was passed on Friday 11 November 2022 but before the official start date of 16 January 2023, you are eligible for a stamp duty refund. You can then revert to the annual property tax payment instead.

Wondering what’s the best choice for you? Speak to an expert!

At Lending Loop our experts are on hand to walk you through the best solution for your NSW home purchase. We can run the numbers and provide advice that considers how long you plan on keeping the home, and whether or not property tax or stamp duty will give you the best results. Get in touch today, and let’s get started!