Changes to Transfer Duty for First Home Buyers

The NSW Government has announced changes to the Transfer Duty regime which may have significant benefits for first home buyers across NSW.  The First Home Buyers Choice scheme (Scheme) has been announced which provides first time home buyers with the option to pay Transfer Duty upfront or opt to pay an annual property tax.  

This Scheme has been introduced to assist first home buyers in purchasing property by reducing the upfront cost of entering the property market. 

When does it start?

The Scheme begins on 16 January 2023.

If you have purchased a property between 12 November 2022 and 15 January 2022, you have not missed out.  First time home buyers who purchased during this period will be given the opportunity to apply for a refund on Transfer Duty and opt in for the annual property tax. 

Eligibility criteria 

To be eligible to apply for the Scheme you must be: 

1. over 18 years old;
2. an Australian Citizen or Permanent Resident; and
3. a first time home buyer. 

There are also requirements for the property you are purchasing.  To be eligible the property must be:

1. a house, townhouse, strata unit, company title unit, flat, duplex, or vacant block;
2. only used for residential purposes; and
3. purchased for less than 1.5 million. 

Additionally, you will be required to move in and live in the property within 12 months of purchase and live in it continuously for at least 6 months. 

How is the annual property tax calculated?

The annual property tax is calculated at a rate of $400 per year plus 0.3 percent of the land value (not purchase price).  There has been no information provided yet which indicates how long first time home buyers will be required to pay the annual property tax.  At this time, you will be required to pay it indefinitely. 

The NSW Government has created a calculator which will provide an estimate of the annual property tax you will be required to pay for your specific property.  The calculator can be found here. 

Considerations to make

The advantages of the Scheme relate directly to your individual circumstances, in some instances you may end up paying significantly more in annual land tax over time than you would have paid in upfront Transfer Duty. 

While the annual property tax will help alleviate a significant financial burden on first home buyers it is important to seek financial advice before opting into the Scheme.  

The team at Donovan Oates Hannaford can assist clients in understanding their transfer duty options and navigating the process. Contact our conveyancing team for more information. We recommend clients seek financial advice when deciding which option is best for you.