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NSW: First Home Buyer Choice

24.01.23 | Marc Barlow | Blog

Avoid dreaded stamp duty

In NSW the government has just started a new system where first homebuyers can opt to pay a much smaller amount every year – called a property tax – rather than the huge up-front stamp duty.

When first homebuyers are saving to buy a property, it’s the up-front costs that make it seem almost impossible. Along with the deposit, you also need stamp duty. This is amount you pay to transfer the title of the property over to you, and typically runs to tens of thousands of dollars.

Here we explain the NSW government’s First Home Buyer Choice program, and help you decide whether it’s right for you.


Who qualifies?

Before getting into the detail, to qualify for the First Home Buyer Choice program you need to tick off these requirements:

  • Australian citizen or permanent resident over 18 years of age,
  • Never previously owned a residential property,
  • Buy a property for less than $1.5 million,
  • Move into the property within 12 months from purchase and live there for at least 6 months.

If this describes you, read on!


Stamp duty and property tax in a nutshell

Stamp duty

Stamp duty is paid when you buy a home. The amount is usually based on the purchase price, so it changes depending on property’s value. It’s a one-off payment.

Annual property tax

This annual tax is based on the land value of the property. The amount is indexed to average income in NSW, meaning it’ll likely rise a bit each year. Similar to council rates, people will be able to pay the property tax in an annual lump sum or a smaller amount every 3 months.

Because the rate will fluctuate, it’s impossible to know the exact amount of property tax you’ll need to pay in the future, but the amount each year could be a drop in the ocean compared to stamp duty.


So which one should I choose?

First of all, this is an ‘opt-in’ scheme, meaning unless you decide to pay the property tax, you’ll pay stamp duty by default. Also, once you lock in to either method, that’s it. You can’t change your mind down the track.

The biggest factor in deciding which option to choose is how long you plan to live in the property. If you’re just starting out with a small property and hope to have a family and get another place in a few years, the annual property tax is probably your best option.

On the flip side, if you plan to stay put for a couple of decades in your dream home – and perhaps renovate or extend at a later date – saving for the stamp duty might work better for you.

According to NSW government figures, 50% of all owner-occupiers sell their property within 10.5 years. The average owner-occupier sells their home within 22.6 years.

Which one are you?


Help with the guesswork

Nobody can predict the future. Choosing between the one-off stamp duty and the property tax does involve a bit of crystal ball gazing. If saving for the stamp duty is out of reach, you need to decide whether the new scheme serves its purpose by helping you get into your own home sooner.

There are online calculators to help you make your choice. The experienced brokers at Mortgage Broker Group can also help. We take your personal circumstances – relationship status, employment prospects, prior savings, current debts and more – into account. This extra attention gives you the best possible chance of making the right decision for your future.


Contact us

If you’re planning to purchase a first property soon, or just want to understand your options for the future, contact Mortgage Broker Group. Our service is at no cost to you, and we can even help you find the best home loan when you’re ready to take the plunge!

Contact us today. There’s no obligation and no cost … ever.