What are the Proposed NSW Stamp Duty Changes?

What are the Proposed NSW Stamp Duty Changes?

NSW Premier Dominic Perrottet is embarking on his long-touted stamp duty reform, by offering some first home buyers the choice of making the up-front payment or opting into an annual property tax.

The choice will initially be made to first-home buyers purchasing a property up-to $1,500,000.

The proposed changes to stamp duty still need to be passed through parliament. The scheme is due to be available from January 16, 2023

What do the changes to stamp duty mean for first home buyers?

From Monday 16 January 2023, many looking to buy their first home will have the choice of paying stamp duty (an up-front, one-off lump sum) or an annual land tax.

The land tax would be at the rate of $400 per year, plus 0.30% of the land value, annually. This choice will be available to first-home-owners purchasing a property under $1,500,000 with the aim of assisting buyers to access the property market quicker by not having to save to pay the stamp duty upfront as an upfront cost.

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For example:

Normal stamp duty payable on a house purchase for $1,000,000
$40,305
Proposed stamp duty payable on a house purchase for $1,000,000 with $800,000 land value
$   400         Initial duty
$2,400 p.a.  Land tax payable on $800,000 at 0.30% p.a.

If we do some basic maths and multiply this by 16.5, this equates to $39,600, which is basically the lump sum amount that is due at settlement via the existing scheme.

Therefore, first-home buyers will generally be better off under the new proposed stamp duty changes if they hold the property for a minimum period of around 15-18 years. This will depend on the assessed land value of the property with unit purchasers having a clear advantage.

It is a bold reform, as stamp duty is a major form of revenue for the NSW Government.

If a buyer decides to pay the annual property tax, that property is locked into the scheme when it is sold.

How do the proposed changes affect existing home owners?

The proposed policy only comes into play for first-home buyers. So, if you have already paid stamp duty in full, you won’t need to worry about the proposed changes.

Key Points

  • The land tax would be at the rate of $400 per year, plus 0.30% of the land value, annually.
  • The scheme is due to be available from January 16, 2023
  • The choice will initially be made to first-home buyers purchasing a property up-to $1,500,000.
  • The proposed changes to stamp duty still need to be passed through parliament.