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With interest rates rising and property prices at a record high, first-home buyers may feel locked out of the housing market. You might spend years saving for a deposit just to watch house prices increase beyond your budget. Plus, once you find a home you like, you’re hit by all sorts of additional expenses, such as stamp duty and land tax.

Fortunately, the NSW government has recently announced a new housing package for 2023 first-home buyers to access affordable housing. Read on to learn everything about the First Home Buyer Choice Scheme.

Key Takeaways:

  • The NSW government has announced a scheme to help first-home buyers afford housing.

  • First-home buyers may choose to pay upfront stamp duty or an annual land tax.
  • The annual property tax payments would cost $400 plus 0.3% of the unimproved land value.

What is the First Home Buyer Choice?

The First Home Buyer Choice Scheme is a program that provides first-home buyers with the choice to pay a one-off upfront stamp duty tax or to pay an annual property tax.

Stamp duty means significant upfront costs for aspiring homeowners. With the option to pay land tax each year, first-time home buyers can spread their expenses rather than cough up a large sum in one go.

With only 67% of New South Wales households owning their home (down from 70% in the 1990s), the government wants to remove barriers preventing first-home buyers from entering the property market. If first-home buyers opt into the First Home Buyer Choice Scheme, they will make annual property tax payments of $400 plus 0.3% of the unimproved land value of the property.

The First Home Buyer Choice Scheme is available to property investors too. Buying an investment property will cost $1,500 plus 1.1% of the unimproved land value of the property.

Houses are not locked into the scheme if the owner sells their home. If you purchase a home from another buyer who opted into the scheme, you are not required to opt into the property home choice scheme.

How much does stamp duty cost?

Stamp duty is a hefty sum for first-home buyers. The specific amount you pay depends on the value of the property. First home buyers are eligible for a full stamp duty exemption for homes up to $650,000. However, with the average property value in Sydney topping $1 million, many first-home buyers face expensive stamp duty fees.

Here are the latest requirements for stamp duty in NSW:

  1. A property valued between $0 to $15,000 costs $1.25 for every $100 (minimum $10)
  2. A property valued between $15,000 to $32,000 costs $187 plus $1.50 for every $100 over $15,00
  3. A property valued between $32,000 to $87,000 costs $442 plus $1.75 for every $100 over $32,000
  4. A property valued between $87,000 to $327,000 costs $1,405 plus $3.50 for every $100 over $87,000
  5. A property valued between $327,000 to $1,089,000 costs $9,805 plus $4.50 for every $100 over $327,000
  6. A property valued over $1,089,000 costs $44,095 plus $5.50 for every $100 over $1,089,000

How much money could you save?

If you have a property worth $800,000 with a land value of $240,000, you would have to pay a stamp duty of $31,415. However, if you are eligible to opt into the property tax, you would pay $400 plus 0.3% of the unimproved land value.

The calculation looks like this:

400 + (0.003 x 240,000) = $1,120

Over 30 years (the average lifetime for your home loan repayments), you would pay an average property tax payment of $33,600. While it’s marginally more costly than if you were to pay stamp duty upfront, you won’t pay the property tax in one go. There will be property tax rates. The scheme could help you get onto the property ladder sooner.

Who are the eligible first home buyers?

Only first-home buyers may apply to the scheme. Eligible first-home buyers for First Home Buyer Choice must meet the following requirements, including being over 18, an Australian citizen or a permanent resident:

  1. You must be a person (not a company or trust) at least 18 years old to be an eligible first home buyer
  2. You, or at least one person applying, must be an Australian Citizen or permanent resident
  3. You must not have owned or co-owned residential property in Australia previously to be an eligible first home buyer
  4. You must not have previously received a First Home Buyer Grant or other duty concessions
  5. The property purchase price must be less than or equal to $1.5 million
  6. You must move in within a year and live in it continuously for at least six months
  7. You must sign the contract of purchase after the scheme commencement date

When will the scheme commence?

The scheme commencement date is the 16th of January, 2023. However, the legislation was passed on the 10th of November 2022, allowing those purchasing a house from 12 November 2022 to 15 January 2023 to opt for the annual property tax. They will still be asked for paying stamp duty, but they can apply for a refund.

What other First Home Buyer Schemes are there?

First-home buyers can also access help through a range of other schemes and support programs, such as:

  1. A co-owned residential property program
  2. First Home Buyer Grant
  3. Regional Home Ownership Guarantee
  4. First Home Buyer Assistance Scheme

It’s worth bearing in mind that you cannot use multiple first-time buyer schemes.

First Home Buyer Choice

While many existing stamp duty concessions are available, first-home buyers purchasing properties in Sydney may struggle with high property prices and other rising costs, such as property tax. If you’re ready to buy your first home, speak to the trusted Sydney home loan brokers to secure a competitive deal.

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Do you pay stamp duty as a first home buyer in 2022?

First-home buyers must plan with paying stamp duty on properties worth $800,000 or more. However, existing stamp duty exemptions are available for properties worth under $800,000. A home valued at $650,000 or less has a complete exemption, while properties between $650,001 and $850,000 are discounted.

What benefits do first home buyers get in Australia?

First-home buyers purchasing can now pay smaller annual property tax rather than making a one-off stamp duty payment. Moreover, many first-time buyer grants or duty concessions, including the First Home Buyer Grant, are available.

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