NSW First Home Buyers can now opt to pay an annual land tax
From today, NSW First Home Buyers can opt to pay an annual land tax rather than up front stamp duty for purchases between $650,000 and $1.5 million. This is a large win for First Home Buyers who were not already eligible for the Stamp Duty Concession as they were buying over the level of $650,000 where stamp duty is payable for first home buyers.
For example, a First Home Buyer buying for $1,000,000 would have needed the following deposit for a 90% loan prior to this scheme:
$100,000 Deposit
$ 40,000 Stamp Duty
$145,000 Needed to complete (allowing $5K for other costs such as legals)
Under the new scheme the $40,000 is no longer needed, so the same clients would need $105,000 to get into a $1 million home at 90% lend. The downside of this is that there is an annual tax to pay moving forward. The tax is based on the land value of the home. For this scenario let’s assume the land value to be $548,000.
The annual land tax for the above property would be $2044pa. This is great for ‘getting into’ the market and a big win if you hold the property for under a certain amount of time. If this home was sold and the buyers upsized in 5 years the total stamp duty paid for the time would have only been $9766. This would have saved them over $30,000, even if they had the stamp duty saved initially.
This would not work as well if the home was held long term. If the home was held for 50 years (assuming the land value stayed the same) the land tax would be $61,444 for the time held. But we all know that land values rise over time. It has been advsied that the increase of this tax will be ‘capped’ at 4% per year. There may also be an increase in the annual cost if this home became an investment property.
The majority of Sphere Home Loans First Home Buyers upsize in under 7 years. So for a lot of our clients, I feel this will be a positive.
There is some more information on revenue NSW below:
https://www.revenue.nsw.gov.au/grants-schemes/first-home-buyer/first-home-buyer-choice
You can also get a link to the Stamp Duty Calculator through Service NSW:
https://www.service.nsw.gov.au/transaction/calculate-your-property-tax
There have been talks from the Labor Government that if they are elected, they will abolish Stamp Duty for First Home Buyers. It is important to note this is capped at $800,000 (now $650,000). So many buyers would still not benefit from this proposition as so many first home buyers are over this threshold.
As with many of the grants available the most important thing to consider is what is best for your personal situation. The team at Sphere Home Loans can guide you through the options of all the banks and lenders and the different grants available to you.