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What does the latest NSW Stamp Duty reform mean to new home builders?

Recently the NSW state government announced an update to stamp duty legislation as part of the latest housing affordability package.

Available from January 16, 2023 – the update offers the choice to first time buyers of making the traditional up-front payment or opting into an annual property tax.

It is important to remember one of the benefits of building is that this stamp duty is only payable on the transfer of land component and not the whole sum like an established residential property.

Currently the upfront payments are calculated as:
Property value Transfer duty rate
$0 to $15,000 $1.25 for every $100 (minimum $10)
$15,000 to $32,000 $187 plus $1.50 for every $100 over $15,000
$32,000 to $87,000 $442 plus $1.75 for every $100 over $32,000
$87,000 to $327,000 $1,405 plus $3.50 for every $100 over $87,000
$327,000 to $1,089,000 $9,805 plus $4.50 for every $100 over $327,000
Over $1,089,000 $44,095 plus $5.50 for every $100 over $1,089,000
 
The optional new system will be calculated as:
Property value Transfer duty rate
Owner occupiers up to $1.5 million (lived in continuously minimum 6 months) $400 plus 0.3% of land value per year
Investment properties up to $1.5 million $1,500 plus 1.1% of land value per year

This means that a block of land for $600,000 right now would cost a buyer an additional $22,305 and must be paid within three months of the date of exchange of contracts – or the settlement date.

However, under the new proposal it allows a buyer to pay $400 up-front plus 0.3% of the land value per year. Which for the above example, would be a $1,800 per year cost on top of the up-front fee.

This will allow first home buyers the opportunity to enter the market sooner without having to save or finance the additional upfront cost to new home ownership.

It is important to note only first home buyers are eligible to opt into this newly proposed property tax substitute. All other purchasers must continue to pay stamp duty as normal. All current first home buyer grants and assistance will continue alongside the stamp duty reform also, meaning first home buyers can be eligible for:
  • $10,000 grant on new homes
  • First Home Buyer Assistance Scheme with reductions or exemptions of transfer duty for varying land values
  • First Home Loan Deposit Scheme through the federal government – who will be your loan guarantor for up to 15% of the purchase price – allowing a deposit without Lenders Mortgage Insurance of just 5%.
  • Labor Federal Government’s future “Help to Buy” shared equity scheme – allowing for the shared purchase of a property and reduction in overall cost.
    • Early indications of NSW having a property price cap of $950k with a $380k maximum savings on new home purchase.
It’s not too early to begin the discussions. As with any scheme it is important to not be last in the door. All assistance and eligibility are usually based on the registration date of the land you’re interested in – so start your journey now by speaking with one of our friendly Burbank New Home Consultants.

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