Following the transition from the Liberal to the Labour government in New South Wales, significant adjustments to the state's stamp duty regulations are on the horizon. Specifically targeting first home buyers, these modifications seek to replace the existing Annual Property Tax scheme with an enhanced First Home Buyers Assistance Scheme. In this article, we will explore the details of these changes and their potential benefits for eligible first home buyers aiming to purchase their first home.
Changes to First Home Buyers Choice (Annual Property Tax)
The Annual Property Tax, which has been a popular choice among first home buyers, has provided a pathway to saving enough funds for a deposit without the added burden of Transfer Duty (previously known as Stamp Duty). Under the current scheme, first home buyers have the option to "opt in" to pay an annual property tax instead of paying the standard stamp duty when acquiring established residential properties or residential vacant land.
Presently, the Annual Property Tax allows first home buyers to purchase established residential properties up to $1.5 million and residential vacant land up to $800,000. The amount payable for the annual property tax is calculated based on the unimproved land value and varies depending on the property's purpose:
Owner-occupied properties: $400 plus 0.3% of the land value.
Investment properties: $1,500 plus 1.1% of the land value.
To take advantage of the First Home Buyers Choice scheme, first home buyers must exchange contracts on or before 30 June 2023, as the scheme will be discontinued from 1 July 2023.
Changes to First Homer Buyers Assistance
Effective from 1 July, the First Home Buyers Assistance Scheme will see adjustments in the Transfer Duty exemption and concession thresholds. The exemption amount will be increased from $650,000 to $800,000, while concessions will be extended from $800,000 up to $1,000,000. As a result, eligible first home buyers purchasing within these thresholds will either be exempt from paying Transfer Duty entirely or will only be required to pay a reduced portion of it.
These modifications are expected to provide valuable support to first home buyers in several ways. In the face of escalating property prices and rising interest rates, the increased exemption amounts better align with the current market conditions. Consequently, first home buyers will have a broader range of options to explore when purchasing their first property, without being compelled to seek homes in distant locations to meet affordability requirements.
Moreover, these changes allow buyers to allocate more of their savings towards the deposit, as opposed to reserving funds for the substantial stamp duty amount. This increased borrowing capacity could potentially save first home buyers from incurring additional expenses such as Lenders Mortgage Insurance, which covers the loan and stamp duty costs on top of the deposit.
To qualify as an eligible first home buyer in New South Wales, you must fulfil the following criteria:
Must be an individual (not a company or trust).
Must be over 18 years of age.
Either the buyer or at least one person involved in the purchase must be an Australian citizen or permanent resident.
Neither the buyer nor their spouse should have previously owned or co-owned residential property in Australia, nor received a First Home Buyer Grant or duty concessions.
Within 12 months of purchase, the buyer must move into the property and continuously reside in it for a minimum of 6 months.
Summary
The proposed changes to stamp duty policies for first home buyers in New South Wales are indicative of a concerted effort to improve affordability and expand opportunities within the property market. By replacing the Annual Property Tax scheme with an enhanced First Home Buyers Assistance Scheme, the government aims to provide vital support to eligible individuals in their pursuit of homeownership. These changes have the potential to alleviate some of the financial burdens associated with purchasing a first home, making the dream of homeownership more attainable for many.
If you have any questions regarding the above changes or require assistance in relation to a property transaction, please contact our office as we would be more than happy to help.
This article is not legal advice, and the views and comments are of a general nature only. This article is not to be relied upon in substitution for detailed legal advice.