New South Wales is getting rid of stamp duty for first homebuyers in this year’s state budget. What will it mean for buying a home? And what will be put in place instead?
What is stamp duty?
Stamp duty is a tax charged by state and territory governments on property purchases, paid at the time of purchase.
The rate will vary depending on the location and the value of the property but currently in New South Wales, for a home priced between $313,000 and $1.04m, the rate is $9,390, plus $4.50 for every $100 over $313,000. So, for example, the stamp duty on a $750,000 home would be $29,055. It’s usually capitalised on to your mortgage.
Why is New South Wales getting rid of it?
The New South Wales government has announced as part of this year’s budget a $728.6m housing plan that will remove what the premier, Dominic Perrottet, says is one of the largest upfront costs to buying a home and instead replace it with an annual property tax.
The government says stamp duty adds two years to the time required to save for a home deposit for NSW households. That calculation is based on someone with the median household income – $1,786 per week, according to the Australian Bureau of Statistics – putting 15% of their income into savings.
What will replace it?
A property tax option will be available for homes of up to $1.5m in value. First homebuyers who opt to pay a property tax will pay $400 per year, plus 0.3% of the land value of the property.
The NSW government has estimated that about 97% of first homebuyers in the state, or around 55,000 people per year, will be eligible.
What about the existing concessions?
First homebuyers will still be able to apply for full stamp duty exemption for properties valued up to $650,000, and concessions for properties between $650,000 and $800,000.
When will the new option be available?
Property tax legislation will need to pass NSW parliament. Perrottet and the NSW treasurer, Matt Kean, said it would be introduced in the second half of 2022, with eligible first homebuyers able to apply from 16 January 2023.
For contracts exchanged between the enactment of the legislation and 15 January 2023, eligible first homebuyers will not pay stamp duty on their purchase.
NSW Labor has indicated it is opposed to the scheme, with the shadow treasurer, Daniel Mookhey, saying it would lead to families being charged annual land tax on their family home that “will last forever”.
If you buy a property from someone who is paying property tax, do you still have to pay stamp duty?
Only first homebuyers are eligible to pay the property tax. Stamp duty otherwise continues as normal.
If you’re buying a property from someone paying property tax, you won’t pay the tax, but will pay stamp duty – unless you are a first homebuyer opting into the property tax scheme.
