Here are the changes to the First Home Buyer Choice (NSW) and why they’re going to make a difference.

The new NSW First Home Buyer Choice scheme has given first home buyers an opportunity to lower the upfront costs of your purchase of a property, whilst also reducing the time needed to save a deposit, fast-tracking your way to a new home.

What is the First Home Buyer Choice?

First Home Buyer Choice is a government initiative that allows first home buyers the choice to either pay the existing upfront stamp duty (known as transfer duty) or an annual property tax when they are seeking to purchase:

  • Residential land (a new or existing home) for up to and including $1.5 million
  • Vacant land on which they intend to build a home for up to and including $800,000.

What is the difference between stamp duty and the annual property tax?

Stamp duty is an upfront payment required to be paid when purchasing a home. This payment is calculated as a percentage of the property’s purchase price or current market value. With a constantly shifting property market, stamp duty has continued to significantly increase over the years. This has made it, in some cases, increasingly difficult for first-home buyers to purchase a property.

To combat the increasing rates, the government has provided the alternate option of an annual property tax. The annual property tax is a series of payments that are based on the land value of the purchased property. This is typically deemed the lower upfront cost, particularly for first-home buyers needing to save their funds. However, it is important to remember that alike to stamp duty rates, this tax may become increasingly costly in the long run. The property tax rates for 2022-2023 and 2023-2024 include:

  • $400 plus 0.3% of land value for properties whose owners live in them
  • $1500 plus 1.1% of land value for investment properties.

*It is important to also note that once a property has opted into property tax, the eligible purchaser/transferee will remain liable for annual property tax until they no longer hold an interest in the property.

What are the eligibility requirements for a first home buyer in NSW?

The eligibility criteria given to first-home buyers in NSW include that:

  • You must be an individual (not a company or organisation)
  • You must be over the age of 18
  • You (or at least one person you’re buying with) must be an Australian citizen or PR
  • The property you are buying must be worth less or equal to $1.5 million
  • You must move into the property within 12 months of your purchase, and live in it continuously for at least 6 months.
  • You must sign the contract of purchase on or after 11 November 2022

What are the property requirements that fit within the First Home Buyer Choice?

  • Eligible properties include a house, townhouse, strata unit, company title unit, flat, duplex or a vacant block of residential land intended as the site of a first home.  
  • A property is not eligible if it includes a business or business premises or is the site of a holiday home. 
  • The value of the property (dwelling) you’re buying must not exceed $1.5 million. If you’re buying vacant land, it must not exceed the value of $800,000. 
  • You must move into the property within 12 months of purchase and live in it continuously for at least 6 months. 

It is important to also note that this application needs to be thoroughly checked and completed. Particularly with regards to submitting the correct and appropriately formatted documents in order to allow your application to be successful and to allow first-home buyers, when purchasing, to be at ease. 

M Legal’s lawyers’ experience within the property market, and particularly throughout the fluctuations caused by the pandemic, is well equipped to give you clarity on this entire process. With our knowledge, we can assist you with your First Home Buyer Choice application and put the most robust case together for you to make this work easier for you.

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Written by Sarah Mathew on behalf of M Legal’s lawyers