Instead of paying the lump sum, eligible first home buyers purchasing properties for up to $1.5 million will be able to choose to pay an annual property tax instead of stamp duty.
The property tax will only be payable by first home buyers who choose it, and will not apply to subsequent purchasers of a property.
The annual property tax payments will be based on the land value of the purchased property.
The property tax rates for 2022-23 will be:
- $400 plus 0.3 per cent of land value for properties whose owners live in them
- $1,500 plus 1.1 per cent of land value for investment properties.
These tax rates will be indexed each year so that the average property tax payment rises in line with average incomes.
“We want to lower the barriers to owning a home for first home buyers seeking a place of their own,” Premier Dominic Perrottet said.
In the past two decades, the share of first home buyers under 35 years of age has declined from 67% to 61%.
Lifting home ownership is part of this Government's efforts and ambition to help families who are feeling the squeeze.
The First Home Buyer Choice will remove one of the largest upfront costs of buying a home and help deliver a brighter future for first home buyers.
Existing stamp duty concessions for first home buyers are also still available for purchases of up to $800,000.
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In total, these measures will offer support to about 97 per cent of all first home buyers, or about 55,000 people per year.
For contracts exchanged in the period between the enactment of the legislation and January 15, 2023, eligible first home buyers will be able to opt-in from January 16, 2023, and receive a refund of stamp duty already paid.
From January 16, 2023, eligible first home buyers who opt into the First Home Buyer Choice scheme will not pay stamp duty on their purchase.
First home buyers who want to get onto the property ladder quickly but are struggling to get together enough money to cover a deposit and also stamp duty could benefit from the government scheme and foregoing the lump sum payment.
It would mean an owner of a $1.12 million property - the medium property price in Sydney - may have a land value of about $750,000 and would need to pay $2,650 a year instead of $49,934 upfront.
And the annual figure will increase in time as the value of the land rises.
However, it's quite possible that measures to help housing affordability could even lift property values in the apartment market and outer, cheaper, suburbs with the twin stimuli for first home buyers of a shared equity scheme and the opportunity to pay an annual land tax instead of an upfront stamp duty.
However, buyers wanting to hold onto the property long term could actually end up paying significantly more by opting for the more digestible annual tax.
In fact, by around 18-19 years, a property owner would have paid the same amount in annual taxes that they would have done paying the lump sum stamp duty payment.
Meaning every payment from then on is an additional cost.
And that would come around even faster as the annual tax increases in line with land value increases.