Stamp duty abolition now only a first home buyers' election

4 minute read  24.06.2022 Nathan Deveson, James Hamblin, Rebecca Barbour

This week the NSW 2022 Budget was handed down, which set out the proposed rollout of the much anticipated property tax. Rather than being a 'once in a generation change to our property tax system', it is a change that only impacts first home buyers.


Key takeouts


  • The NSW Government's much anticipated 'modern tax system' is for first home buyers only.
  • Bears little resemblance to the 'once in a generation change to our property tax system' proposed in the NSW Government's consultation papers.
  • A doubling of the NSW surcharge land tax rate for foreign owners of 'residential property' for the 2023 land tax year onward was also confirmed.

No doubt you have seen the headline items from the NSW budget delivered by the Treasurer on 21 June 2022.

Importantly, the First Home Buyer Property Tax Option (summarised on page 64 of the Budget Statement):can only be chosen by, and apply to, first home buyers;

  • only applies to purchases of up to $1.5m;
  • operates as an annual tax on the property's unimproved land value (different rates apply for owner occupiers and investors);
  • applies for as long as the property is owned by the first home buyer(s);
  • will operate from 16 January 2023 if the (not yet drafted) Bill passes through Parliament; and
  • does not replace the existing stamp duty concessions for first home buyers.

Obviously this limited measure bears little resemblance to the 'once in a generation' change to our property tax system' proposed in the NSW Government's consultation papers last year. Contrary to last year's proposal, an election into the new system will not mean that future buyers of the same property will be locked into the new system.

In a sense the new measure is simply another type of first homer buyer grant / concession by a different name.

Given that eligible purchasers will not be able choose to enter the new property tax system until 16 January 2023, a key commercial question is whether it will cause a material amount of first home buyers to delay entering into purchase contracts until that date. However, for off-the-plan purchases we do not expect a material impact given that:

  • purchasers buying from the time legislation is enacted until 16 January 2023 may seek a refund of duty paid if they wish to opt into the new model;
  • a 12 month duty deferral concession applies for non-foreign principal place of residence buyers (section 49A of the Duties Act NSW (1997)); and
  • no/concessional duty is payable on new homes valued at less than $800,000 in any event (ie this regime is only really relevant to off-the-plan purchases within the $800,000 to $1.5m bracket)

Separately, also confirmed was an increase in the NSW surcharge land tax rate for foreign owners of 'residential property' for the 2023 land tax year onward (from 2% p.a. to 4% p.a.).


Please contact us if you would like to discuss the impacts of any of these issues in more detail.


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https://www.minterellison.com/articles/stamp-duty-abolition-now-only-a-first-home-buyers-election

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