First Home Buyer Choice FAQs

Read common questions about the introduction of the 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 compare the applicable rates of stamp duty and annual property tax and choose which best suits their circumstances.

When will this come into effect?

The property tax option will become available once it is legislated, which is expected in the second half of 2022.

Eligible first home buyers who purchase a property on or after 16 January 2023 and who choose the property tax will not have to pay stamp duty to complete their property transaction.

For contracts signed in the period between enactment of the legislation and 15 January 2023, eligible first home buyers will be able to apply to choose the property tax, but they will still need to pay stamp duty and then apply for a refund of stamp duty from 16 January 2023.

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), would 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, 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 by Gross State Product per capita to ensure that average payments grow in line with average incomes.

The indexed property tax rates would apply for as long as the first home buyer continues to live in that property. Higher property tax rates would apply if the property is rented out.
First home buyers purchasing a home for $650,000 or less are exempt from stamp duty and are not expected to choose the property tax.

For purchases between $650,000 and $1.5 million, the average stamp duty paid by people buying their first home is around $30,000. If all of these first home buyers chose the property tax, their average annual property tax liability would be around $1,700.

Example 1

A first home buyer purchasing an apartment in Sydney for $830,000 with a land value of $265,000 will have the choice between upfront stamp duty of $32,440 or an initial annual property tax of $1,195.

Example 2

A first home buyer purchasing a house in Sydney for $1,350,000 with a land value of $810,000 will have a choice between upfront payment of stamp duty of $59,125 or an initial annual property tax of $2,830.

How can I compare property tax and stamp duty?

An online property tax calculator will be available after the passage of legislation and before 16 January 2023, when buyers can opt-in to property tax.

In the meantime, you will be able to estimate applicable property tax by finding the current land value of a property on the Valuer General’s website. The annual property tax payments will be based on the land value of the purchased property, which is determined by NSW Valuer General. You can estimate the owner-occupier property tax by applying the indicative rate: $400 plus 0.3 per cent of the land value.

A stamp duty estimate, including First Home Buyers Assistance, can be made by using the online calculator available on the Revenue NSW website

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 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 by Gross State Product per capita to ensure that average payments grow in line with average incomes. 

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?

The process for applying for property tax will be set out on the Revenue NSW website from 16 January 2023. An application to opt into property tax can be made through your solicitor or conveyancer from 16 January 2023 and must be made prior to settlement.

For retrospective opt-in (i.e. for contracts entered into between enactment of the legislation and 15 January 2023), an application will need to be lodged with Revenue NSW to opt in and for the refund of duty paid from 16 January 2023.

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.

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