First Home Buyer Choice Property Tax

Update as at 01/07/2023: The First Home Buyer Choice is NO LONGER AVAILABLE

This year, the New South Wales Government implemented the long awaited First Home Buyer Choice Property Tax. This provides first home buyers with the option to pay an annual tax instead of a lump sum amount of stamp duty when they purchase a home.

Property prices have increased dramatically over the last decade and for many, that almost pushed the Australian dream of owning a home, out of reach. Recent interest rate rises and higher costs of living have put further pressure on people trying to save money to buy property. The First Home Buyer Choice Property Tax is designed to it easier for first home buyers to enter the property market.

First home buyers who meet the criteria provided by Revenue NSW, can opt in to the Property Tax when they purchase a property in New South Wales.

Who is eligible?

To be eligible for First Home Buyer Choice Property Tax:

• you must be an individual (not a company or trust)
• you must be over 18 years old
• you, or at least one person you’re buying with, must be an Australian citizen or permanent resident
• you or your spouse/defacto must not have previously:
  • owned or co-owned residential property in Australia
  • received a First Home Buyer Grant or duty concessions.
• you must sign the agreement for sale or transfer of land on or after the initiative commencement date (see below for details)
• the agreement for sale or transfer of land must be signed on or after 11 November 2022, or
• an off the plan purchase contract, must be signed on or after 11 November 2021 and settlement is on or after 11 November 2022.

What properties are eligible for the First Home Buyer Choice Property Tax?

There are some limits on what properties can be used for the First Home Buyer Choice Property Tax scheme. First home buyers need to:

1. Purchase of a house, unit, townhouse or villa valued up to $1.5 million; or
2. Purchase of vacant land valued up to $800,000, upon which the first home buyers need to build a house to live.

These values are far more generous than the First Home Buyers Assistance Scheme which allows first home buyers to have a full exemption or a discount on the amount of stamp duty payable for their purchase (buyers can access First Home Buyer Choice Property Tax and First Home Buyers Assistance Scheme if they are eligible for both).

What properties are not included in First Home Buyer Choice Property Tax?

The Property Tax is only available for properties that will be the primary residence for the first home buyers. It cannot be used for primary production land, commercial properties or holiday homes.

How does the First Home Buyer Choice Property Tax work?

If buyers opt in to the First Home Buyer Choice Property Tax, they do not need to pay stamp duty when they purchase the property. Rather, an annual property tax will be applied to the property.

The amount of property tax payable will increase each year, but this is capped at a maximum of 4% increase per year. The NSW Government includes a calculator on their website which is designed to help people calculate how much Property Tax they will need to pay.

Buyers must reside in the property for at least 6 months after settlement. If buyers want to switch to using the property as an investment after living there for at least 6 months, then a much higher rate of property tax will be payable each year.

What if the buyers are not Australian citizens?

To opt in to First Home Buyer Choice Property Tax, at least one buyer must be an Australian citizen or permanent resident.

If one or more of the buyers is not an Australian citizen, then surcharge stamp duty may be payable, even if the buyers opt in to the property tax regime.

Further information

We have provided general information on the First Home Buyer Choice Property Tax. We recommend you obtain legal advice about your eligibility to opt in to the First Home Buyer Choice Property Tax and other exemptions or concessions available to first home buyers in New South Wales.

You may also wish to seek advice from a qualified financial advisor or accountant to determine if the First Home Buyer Choice Property Tax is suitable for your circumstances.