The NSW Government’s Property Tax Reform Bill was passed in parliament on Thursday 10 November 2022. While these reforms will not come into operation until 16 January 2023, the government is introducing changes to the property tax regulations this weekend.
As of the 12 November 2022, to encourage first home buyers to enter the property market, the Perrottet Governmentis offering purchasers the option to pay a land tax rather than the upfront stamp duty.
What does this mean for the first home buyers?
In NSW, land tax is calculated as $100 plus 1.6% of the land value over $822, 000. This means a property with a land value of $ 1 million currently attracts a land tax of $2,948.
As of 12 November 2022, a NSW residential property valued at $1, 500 000 will attract a land tax of $400 annually as of tax reform bill.
Comparatively, Stamp duty, the upfront tax charged for transfers of property such a real estate, is in comparison to land tax, a hefty burden for home buyers.
According to the Macquarie stamp duty calculator, a residential property in NSW valued at $ 1 million will attract a stamp duty of $40, 398. This is a crippling upfront cost for first home buyers who are currently subject to increases in mortgage interest rates.
Are purchasers locked into paying land tax annually?
The NSW government has designed the scheme so when you sell the property, the purchaser is not locked into the initial tax choice you made as a first home buyer. However, if the new owners are not first-time home buyers, they would have to pay stamp duty.
The choice between paying a land tax or upfront stamp duty, will reduce the period for first home buyers to save a deposit, enabling them to enter the property market sooner than anticipated.
NSW treasury estimates 6500 first home buyers will take up the option to pay an annual land tax instead of the upfront stamp duty.
The new property tax reforms are a definite win for first home buyers looking to enter the property market and grow their wealth.
To calculate how much land tax or stamp duty you will be paying on a property consult the NSW Government website:
