The introduction of the New South Wales Government’s First Home Buyers initiative is the biggest shake up to the property tax system in decades and will significantly improve the prospects of first home buyers struggling to purchase a home to live in or as an investment property.
Understanding the changes
The initiative means buyers will now have the option of paying a smaller annual land tax rather than a one off stamp duty payment. On a typical house valued at $1 million, buyers can decide whether to pay an annual fee of $2,200, or $40,090 upfront.
For an apartment valued at $750,000, a first home buyer will need to pay a concessional rate of stamp duty which equates to $20,727. This is in stark contrast to the annual property tax on the apartment which will be $1,210.
Not only does this significantly reduce upfront costs, but it will also reduce the time it takes for first home buyers to save for a deposit.
Eligibility
All homes valued under $1.5 million will be eligible for the scheme as is all vacant land valued under $800,000 that is intended to be the site of a first home.
Annual tax payments for properties used as a home are calculated as $400 plus 0.3 per cent of the land value while properties purchased as an investment are calculated as $1500 plus 1.1 per cent of the land value.
The First Home Buyers Choice initiative will come into effect from 16 January 2023. If a first home buyer settles prior to this date, they will be eligible to apply for a refund of their stamp duty after 16th January.
How Falanga & Co can help
The First Home Buyers Choice initiative will dramatically improve the ability for first home buyers to access the property market, but there are a range of important factors to consider.
From your deposit size, to the value of the property and how long you intend to hold onto it, your personal circumstances and objectives will determine whether it makes sense to select the annual land tax option over stamp duty.
For any questions in relation to the First Home Buyer Choice initiative, please get in touch with us today.
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