Co-authored by: Nicole Colbert
KEY TAKE-OUTS:
- How long can the annual property still be used?
- What will replace annual property tax?
- Will these changes help First Home Buyers…
With the recent change from Liberal to Labor, the Labor government have abandoned Liberal’s NSW Annual Property Tax – First Home Buyers Choice scheme and has increased the First Home Buyers Assistance Scheme.
Changes to First Home Buyers Choice (Annual Property Tax)
The annual property tax option has been beneficial to some first home buyers as this allowed First Home Buyers to save enough funds for a deposit without the worry or need to also save for Transfer Duty (previously called Stamp Duty) by allowing First Home Buyers to ‘opt in’ to the property tax and pay a smaller annual property tax instead of stamp duty.
From 11 November 2022 to 30 June 2023, the Annual Property Tax allowed First Home Buyers to purchase established residential property up to $1.5 million and residential vacant land up to $800,000.
The annual property tax payments are based on the unimproved land value of the purchase property. The property tax rates for the 2022-2023 & 2023-2024 financial years are:-
- $400 plus 0.3% of land value for owner occupied properties (where the property is the owners main residence)
- $1,500 plus 1.1% of land value for investment properties.
First Home Buyers who wish to take advantage of this scheme needed to exchange contracts on or before 30 June 2023 to be able to opt into the First Home Buyer Choice scheme before it was abolished on 1 July 2023.
Changes to Transfer Duty (previously known as Stamp Duty)
From July 1 the First Home Buyers Assistance Scheme has increased the Transfer Duty exemption amount from $650,000 to $800,000 with the concessions being increased from $800,001 up to $1,000,000. This means if you pay up to $800,000 for your first property and are an eligible First Home Buyer you will not be required to pay any Transfer Duty. If you purchase your first property between $800,001 to $1,000,000 you will receive a concession and will only be required to pay a portion of Transfer Duty.
These changes are now available to First Home Buyers.
What will happen to First Home Buyers who have opted to use property tax prior to 30 June 2023
First home buyers who have opted in to use the property tax option will continue to receive their annual tax assessment from Revenue NSW and will be required to make their annual payments until they sell the property.
The property tax policy has been available to first home buyers on and after 11 November 2022 and was officially introduced on 16 January 2023. The option allows you to opt-in to pay an annual property tax on your first property to the value of up to $1,500,000. Anyone that opted in then would avoid paying the usual Transfer Duty payable upfront.
This system opened up the property sales market to first home buyers even further, allowing them to purchase property for a higher amount with their savings being put toward their purchase price instead of Transfer Duty, which would lower their borrowing capacity.
Are these changes helpful to First Home Buyers?
With the ever-growing prices for property and the continuous interest rate rises, the increase of the purchase amount for exemptions is now becoming more in line with the property market and this will allow first home buyers more options to purchase homes within the Sydney Metropolitan Area without the need to move further out to afford their first home.
This will also allow purchasers to save more money for their deposit without the need to further save for the stamp duty amount, this will allow a First Home Buyers borrowing capacity to increase and possibly save First Home Buyer’s the additional cost of needing Lenders Mortgage Insurance to cover the loan and the stamp duty amount on top of their deposit.
Who is an eligible First Home Buyer in New South Wales?
- You must be an individual (not a company or trust);
- You must be over 18 years old;
- You, or at least one person you’re buying with, must be an Australian citizen or permanent resident;
- You or your spouse (either married or de-facto relationship) must not have previously owned or co-owned residential property in Australia, nor received a First Home Buyer Grant or duty concessions; and
- You must move into the property within 12 months of purchase and live in it continuously for at least 12 months.
ABOUT NICOLE COLBERT:
Nicole joined the Coutts team in March 2022 as a Conveyancing Assistant in our Property Law & Conveyancing team, working out of our Narellan office.
Nicole has been working in the Legal industry for 15 years, previously as a Paralegal. In 2021, Nicole completed her Conveyancing Degree and is currently working towards becoming a Licensed Conveyancer.
For further information please don’t hesitate to contact:
Nicole Colbert
Conveyancing Assistant
info@couttslegal.com.au
1300 268 887
Contact Coutts today.
This blog is merely general and non-specific information on the subject matter and is not and should not be considered or relied on as legal advice. Coutts is not responsible for any cost, expense, loss or liability whatsoever to this blog, including all or any reliance on this blog or use or application of this blog by you.
