In June 2022, a milestone policy was included in the NSW Government Budget to offer first home buyers the choice to pay a one-off lump sum tax (‘stamp duty’) or an annual land tax when purchasing homes under a certain value.
The legislation for this policy is planned to be introduced later this year, with plans for the new first home buyer scheme to start from January 16, 2023.
The property tax rates for 2022-23 will be:
- $400 plus 0.3 per cent of land value for properties whose owners live in them
- $1,500 plus 1.1 per cent of land value for investment properties.
The property tax option will be available for properties for up to $1.5 million, helping a broader group to become first home buyers. These measures will support approximately 97 per cent of all first home buyers, or about 55,000 people per year.
Eligible first home buyers who sign a contract of purchase between the passage of the legislation and 15 January 2023 will be eligible to opt into the property tax. However, these purchasers will be required to pay any applicable stamp duty within the usual required periods and from 16 January 2023, will be able to apply for and receive a refund of that duty.
The current stamp duty exemption for properties purchased by first home buyers less than $650,000 will remain in place. The stamp duty for first home buyers purchasing properties between $650,000 and $800,000 will continue to be reduced.
But Is This Outcome Something That Could Be Applicable Across Australia’s Other States & Territories?
Stamp duty varies for each state in Australia. As a general rule of thumb, it’s 3-4% of the property value (varies according to state).
Replacing stamp duty with the option to pay an annual land tax reduces barriers for people to move to a different town or city to pursue better job opportunities. For example, often better employment opportunities exist in larger centres, but the cost of housing in such areas can be prohibitive for workers to relocate.
Older homeowners often wish to downsize their homes to free up money for retirement, but stamp duty makes this a costly option for some people.
Currently, NSW is the only state that has introduced this policy, with legislation to be introduced later this year. How it progresses over time will likely indicate whether or not other states & territories will.
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