First Home Buyer Choice Scheme – NSW (Stamp Duty VS Property Tax)

December 15, 2022News

The NSW First Home Buyer Choice kicked in on 12 November, offering first home buyers the opportunity to choose between paying a smaller annual property fee or a large upfront stamp duty on their first property, up to $1.5 million.

While the policy becomes fully operational on 16 January 2023, eligible first home buyers purchasing a property from now until 15 January 2023 will be able to switch to the annual property tax and have their stamp duty refunded.

Here’s a link to a great article on the scheme to help you understand what might be best for you: Stamp Duty vs Land Tax: First Home Buyer Choice Explained | Canstar

As always – the preference here will depend on your circumstances.

There’s a couple of considerations: Firstly – what’s the overall best financial outcome; and Secondly – if maximizing your purchase price is the priority which option better allows you to do this.

In most cases – based on how long first home buyers stay in their first property, the size of the dwelling and therefore associated land value (units / town houses etc) – the property tax will work out as a better financial option. NSW Treasury expects that up to two-thirds of first home buyers will choose to pay a smaller annual property fee rather than forking out for stamp duty upfront, especially those spending between $800,000 and $1.5 million who plan to sell their property within 10 years of purchase.

However,  the property tax expense also needs to be factored into your annual budgeting as it is another ‘liability’ that will impact your loan servicing capacity and therefore maximum borrowing power. Some first home buyers are limited on their maximum purchase price based on their savings and deposit, whilst others are limited by income and serviceability. While this significantly assists those restricted by their savings or overall deposit, it will not be helpful for those restricted by income as this annual tax will further reduce their borrowing power.

As always – you should speak to mortgage professional who can help you decide what might be best for you before deciding which way to go.

Please reach out to us should you have any questions or can assist in anyway.

Article by Scarlett Financial