Purchasing a first home in Australia can be an exciting but overwhelming experience. One of the biggest decisions first-time buyers must make is whether to pay the stamp duty or property tax on the property they are purchasing.

Stamp duty is a tax that is imposed by the government on the purchase of a property. It is calculated as a percentage of the purchase price and varies from state to state. In New South Wales (NSW), stamp duty can be quite high, with rates ranging from 1.5% for properties valued at $500,000 or less, to 7% for properties valued at $3 million or more.

Property tax, on the other hand, is an annual tax that is imposed by the government on the ownership of a property. In NSW, property tax is calculated based on the value of the property and is usually around 1.6% of the value of the property.

The new stamp duty policy begins on January 16, 2023. For agreements made between November 11, 2022 and January 15, 2023, buyers have the option to pay stamp duty and then apply for a refund starting on January 16, 2023 if they choose to participate in the First Home Buyer Choice program. However, this program is only available to individuals buying their first home and will not apply to those buying a property that they have already owned.

What Properties Are Eligible For Property Tax?

This option is available for both new and existing homes with a value of up to $1.5 million, as well as vacant land with a value of up to $800,000, as long as the intent is to build a first home on the land. However, properties used for primary production, business purposes, or as holiday homes are not eligible for the program. Additionally, for off-the-plan purchases made after November 11, 2022, the option to opt-in for property tax is still available as long as the purchase has not been settled before that date.

Who is eligible?

The First Home Buyer Choice program is available to individuals who are buying their first home in New South Wales. To be eligible, you must:

• Be an individual (not a company or trust)

• Be over 18 years old

• Be an Australian citizen or permanent resident (or at least one person you’re buying with should be)

• Sign the agreement for the sale or transfer of land on or after the initiative commencement date

• Occupy the new or existing home as the principal place of residence for a continuous period of at least 6 months (occupation starts within 12 months after settlement)

• You or your spouse shouldn’t have previously:

  • Owned or co-owned residential property in Australia

  • Received the First Home Buyer Grant or stamp duty concessions

• If you’re buying vacant land, you should meet the following requirements for the owner-occupier rate to apply for up to 5 years:

  • After completion of the construction, the land must be your principal place of residence for a continuous period of at least 6 months

  • Construction on the land should commence within 2 years

  • You can’t derive an income from the land

  • You haven’t or do not own another land

It's best to contact Revenue NSW for more information as some eligibility criteria may vary depending on your situation.

First-time buyers in NSW have the option to pay either stamp duty or property tax, but which one is the better choice?

The answer to this question depends on the individual's personal circumstances and financial situation. If a first-time buyer has the funds to pay the stamp duty upfront, it may be the better choice as it is a one-off payment. However, if a first-time buyer does not have the funds to pay the stamp duty upfront, they may choose to pay the property tax instead.

It's important for first-time buyers to consider their financial situation and speak with a financial advisor before making a decision. They also can also benefit from government schemes or grant for first home buyers which can help with the cost of stamp duty or other expenses associated with buying a home.

In conclusion, first-time buyers in NSW must decide whether to pay stamp duty or property tax when purchasing a property. Both have their pros and cons, and the decision should be based on the individual's personal circumstances and financial situation. It's important to speak with a financial advisor and research government schemes before making a decision.

Book an appointment with us so that we can explain you and help you in making a decision.