NSW Bill Proposes to Allow First Home Buyers to Opt Out of Paying Stamp Duty

Wednesday 19 October 2022 @ 11.36 a.m. | Legal Research

On 12 October 2022, the Property Tax (First Home Buyer Choice) Bill 2022 (NSW) (“the Bill”) was introduced into the New South Wales Legislative Assembly by Treasurer Matt Kean ("the Treasurer").

The Bill seeks to reform home ownership for first home buyers, by giving buyers the option to either pay stamp duty when purchasing their first home, or to pay a smaller annual property tax.

The Bill passed the lower house with no amendments on 18 October 2022, and is yet to be introduced to the upper house.

Key Objective of the Bill

In the Second Reading Speech for the Bill, the Treasurer explained that the proposed changes were aimed at making home ownership more accessible for younger people. The Treasurer acknowledged the current difficulties younger people face in saving up for their first home:

“Overall, rates of home ownership in New South Wales have fallen from 70 per cent in the 1990s to 64 per cent in 2021. For younger people aged 25 to 34, the national rate of home ownership sits much lower, at around 41 per cent in 2019-20. It is taking first home buyers longer than ever before to save the funds they need for a deposit and to pay stamp duty. In the 1990s it would take the median New South Wales household, putting aside 15 per cent of their income, around six years to save for a 20 per cent deposit on the median property in New South Wales and one year to save for stamp duty. It now takes that same household around 10 years to save for a 20 per cent deposit and two years to save for stamp duty.”

This Bill aims to alleviate the immediate financial burden on first home buyers by introducing an opt-in scheme, giving buyers the choice to pay property tax instead of stamp duty up front.

Proposed Opt-in Scheme

If the Bill is passed, the scheme will be available to eligible first home buyers who are purchasing either:

  • residential land, up to a price of $1.5 million; or
  • vacant land for a residential dwelling, up to a price of $800,000.

Eligible persons will need to apply to the Chief Commissioner of State Revenue (“the Chief Commissioner”) to opt into the scheme, and must occupy the subject land for a continuous period of at least 6 months, starting within the first 12 months of the transfer. The property tax would be payable in accordance with the notice of assessment issued by the Chief Commissioner.

Proposed Property Tax Rate

Schedule 2 of the Bill proposes how the new property tax is to be calculated.

For a financial year ending on or before 30 June 2024, the tax rate specified for land that is owner-occupied, is $400 pus 0.3% of the land value rate. With these tax rates to be indexed each year from the 2024-25 financial year, however, clause 24 of the Bill proposes to cap year-to-year growth of the tax at 4%.

Clause 55 of the Bill also proposes that if a Minister proposes to increase the property tax above the indexed amounts, they must first:

  • notify the public and any relevant organisations of their intention to do so, giving a reasonable opportunity for written submissions;
  • table a summary of the opinions in any written submissions received in each House of Parliament; and
  • give notice of any proposed Bill to increase the property tax at least 30 sitting days before is it is introduced in Parliament.

To enable effective operation of the scheme and ensure that land opted into the scheme is not charged duty, the Bill also proposes other consequential amendments to legislation including the Duties Act 1997 (NSW) and Land Tax Act 1956 (NSW).

The Treasurer further summarised that the proposed legislation:

“…is about giving first home buyers the choice to decide the pathway to home ownership that best suits their own personal circumstances…It will reduce the time needed to save for a home by giving young people the option to bypass one of the biggest hurdles faced by many people trying to get their first home: stamp duty.”

If passed by both Houses of Parliament, the new scheme is expected to come into effect from 16 January 2023.

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Property Tax (First Home Buyer Choice) Bill 2022 (NSW) and additional explanatory material available from TimeBase’s LawOne Service

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