Common questions about First Home Buyer Choice

What is the First Home Buyer Choice?

The Government is providing first home buyers purchasing a new or existing home for up to $1.5 million the choice to either pay the existing upfront stamp duty or an annual property tax. A first home buyer purchasing vacant land on which they intend to build a home for up to $800,000 will also have the choice of either stamp duty or an annual property tax.

First home buyers will continue to be eligible for first home buyer stamp duty exemptions and concessions. Because first home buyers purchasing a new or existing home for up to $650,000 are exempt from stamp duty, they are not expected to choose the property tax.

For purchases of new or existing homes above $650,000 and below $1.5 million, eligible first home buyers can use the First Home Buyer Choice Calculator to compare the estimated annual property tax and stamp duty and choose which best suits their circumstances.

When will this come into effect?

The Property Tax (First Home Buyer Choice) Act 2022 took effect on 16 January 2023.

There is also a transitional period before 16 January 2023, when eligible first home buyers will have to pay stamp duty, but can then apply for a refund of the duty after 16 January 2023.

General Commencement: Contract of purchase signed on or after 16 January 2023

Eligible first home buyers who sign a contract of purchase on or after 16 January 2023 and opt into property tax will not have to pay stamp duty.
An application to choose property tax must be made before settlement.
An application to choose property tax may be revoked by the applicant if the applicant makes an application to the Chief Commissioner for revocation before settlement.
After settlement, a property cannot be opted into or out of property tax.

Transitional Period: Contract of purchase signed between 11 November 2022 and 15 January 2023

Eligible first home buyers who sign a contract of purchase between 11 November 2022 and 15 January 2023 will also be able to choose the property tax:
For this group, applications to choose the property tax can be made at any time between 16 January 2023 and 30 June 2023.
If settlement occurs on or before 15 January 2023, they will need to pay stamp duty, and then will be able to apply to Revenue NSW for a refund of the stamp duty from 16 January 2023. Once Revenue NSW processes the application, the decision to choose property tax cannot be changed.
If settlement occurs on or after 16 January 2023 and they have chosen property tax, they will not need to pay stamp duty.
First Home Buyers that are thinking of buying during the transitional period do not need to do anything differently, but they can purchase knowing that from 16 January they can opt-into the First Home Buyer Choice.

Off-the-plan purchase contracts signed on or after 11 November 2021 which settle on or after 11 November 2022

Eligibility to choose property tax depends on the legal date at which stamp duty liability arises.
For properties that are purchased off-the-plan and used as a principal place of residence, liability for stamp duty arises at the earlier of (a) 12 months after the contract is signed or (b) when settlement occurs.
First home buyers who signed an off-the-plan purchase contract on or after 11 November 2021 which settles on or after 11 November 2022 can apply for the property tax.
For off-the-plan purchase contracts signed on or after 11 November 2021:
- If settlement occurs between 11 November 2022 and 15 January 2023, first home buyers will need to pay stamp duty and then they will be able to apply to Revenue NSW for a refund of the stamp duty. Applications to choose the property tax can be made between 16 January 2023 and 30 June 2023. Once Revenue NSW processes the application, the decision to choose property tax cannot be withdrawn.
- If settlement occurs on or after 16 January 2023 and first home buyers have chosen property tax, they will not need to pay stamp duty.

You may contact Revenue NSW for further advice. To keep up to date with key updates on the First Home Buyer Choice, you can register here.

Who is eligible to opt into property tax?

First home buyers, complying with the current First Home Buyer Assistance Scheme eligibility criteria, and the purchase price thresholds ($1.5 million for properties with a home or $800,000 for vacant land), will be eligible to choose the property tax.

Applicants must be an individual who is over 18 years old and must not be a company or trust.

The first home buyer and their spouse or partner must never have owned or co-owned residential property in Australia and never received a first home buyer exemption or concession.

The first home buyer must move into the new home within 12 months after buying the property and live there for a continuous period of at least six months.

If a first home buyer chooses the property tax, how much will they pay each year?

In 2022-23 and 2023-24, annual property tax rates for owner-occupiers will be $400 plus 0.3 per cent of the property’s land value (as determined by the NSW Valuer General).

The property tax rates will be annually indexed from 2024-25 to ensure property tax remains an affordable option for first home buyers. The indexation system will ensure that the average property tax payment grows in line with Gross State Product per capita (a measure of average income). Over the past 15 years, GSP per capita has grown at an average annual rate of 3.2 per cent.

The legislation also provides that the property tax on an individual property can never grow by more than 4 per cent from one year to the next.

How can I compare property tax and stamp duty?

An property tax calculator is available online.

In choosing between stamp duty and property tax you may wish to think about how long you are likely to hold the property, and the number of years you might have to pay the property tax if you choose that option.

If you are planning to hold the property for a long time, you might prefer to pay stamp duty. If you are planning to hold the property for a short time, you might prefer to pay an annual property tax.

Half of all owner-occupiers sell their property within 10.5 years. The average owner-occupier sells their home within 22.6 years.

Can first home buyers convert this property into an investment property down the track?

Yes, although they will be required to notify Revenue NSW of this change of use.

In 2022-23 and 2023-24, the annual property tax rates for residential investment properties will be $1,500 plus 1.1 per cent of the property’s land value. The property tax rate will be annually indexed from 2024-25 by Gross State Product per capita to ensure that average indexed payments grow in line with average annual incomes. In addition, the year-to-year growth of the property tax payments is capped at 4 per cent.

To remain eligible for first home buyer property tax, a first home buyer must move into the property within 12 months of purchase and live in it for six continuous months.

I am an eligible first home buyer and would like to choose the property tax. Do I have to pay a whole year of property tax when I apply?

No.

The property tax can be paid in quarterly or annual instalments, like council rates.

The property tax will be assessed for a financial year (i.e. 1 July to 30 June).

Property tax liability will commence from settlement of the property purchase (which is usually when the buyer receives the keys to the property).

If a first home buyer purchases a property part of the way through a financial year, the liability will be reduced on a daily pro rata basis, so that the purchaser only pays for the number of days they own the property during the relevant financial year.

If a first home buyer cannot afford to pay the property tax, will they be forced to sell their home to meet property tax liabilities?

No.

Nobody will ever be required to sell their home to meet property tax liabilities.

A property tax deferral scheme will be available, recognising that taxpayers’ financial situations can change over time.

Where the Chief Commissioner is satisfied that a household is unable to meet their property tax payments, they will be permitted to defer those payments until their financial situation changes or the property is sold.

Can a first home buyer change their mind and switch to stamp duty once they have chosen property tax?

No. First home buyers have the choice between stamp duty or property tax prior to settlement. Once this choice is made, it cannot be changed after settlement. If a first home buyer chooses the property tax they must continue to pay the property tax until they are no longer the owner of the property.

What is the difference between property tax and land tax?

Property tax is an annual tax levied each financial year on an individual property based on its land value. There are separate property tax rates for owner-occupied and investment property.

If a first home buyer chooses to pay the property tax on their first home, they will not be liable for either stamp duty or land tax in respect of that property.

There are no proposed changes to land tax.

Land tax is an annual tax levied at the beginning of each calendar year on the total value of all the land you own that is above the land tax threshold. Your principal place of residence is exempt from land tax, and other exemptions and concessions may apply. See Revenue NSW website for more information.

Where and when do I apply for the property tax?

An application to opt into property tax can be made through your solicitor or conveyancer from 16 January 2023.

For retrospective opt-in (i.e. for contracts entered into between 11 November 2022 and 15 January 2023), an application will need to be lodged with Revenue NSW to choose property tax between 16 January 2023 and 30 June 2023. If stamp duty has already been paid on the purchase, it will be refunded if the application for property tax is approved.

How does this impact non-first home buyers?

There will be no changes to any tax arrangements for non-first home buyers from this initiative. This includes non-first home buyers that purchase farmland, commercial property, residential investment property or move to a new principal place of residence (e.g. upsize or downsize).

How will the property tax affect tenants who are renting from someone who is paying the property tax?

Only first home buyers are eligible to choose the property tax, and they must live in the home they have purchased for a minimum of six months. However, some of these first home buyers will eventually move out of these homes and rent them out to tenants, while still being required to pay the property tax.

Section 40 of the Residential Tenancies Act 2010, requires residential landlords to pay State taxes. Tenants cannot be asked to pay the property tax.

The level of rents is determined by market forces: the supply and demand for rental properties. The first home buyer property tax is not expected to have any noticeable effect on the level of rents.

If a tenant disputes a rental increase by a landlord who is paying the property tax, existing mechanisms with NSW Fair Trading and the NSW Civil and Administrative Tribunal are available.

Notices of assessment

Property tax notices of assessment will be issued by Revenue NSW. For more information, visit the Revenue NSW website.

First Home Buyer Choice FAQs