NSW Land Tax

The New South Wales (NSW) Treasurer, the Hon. Matt Kean MP, announced tax measures as part of the 2022-2023 State Budget on 21 June 2022.

From the 2023 land tax year, surcharge land tax payable on residential land owned by foreign persons is increased from 2% to 4% of the taxable value of the residential land owned at midnight on 31 December 2022.

The discount for early payment of land tax is reduced from 1.5 per cent to 0.5 per cent if paid within 30 days after service of the notice of assessment.

First Home Buyers Choice

First home buyers will be given the choice between paying an annual property tax or stamp duty.

Revenue NSW has confirmed that first home buyers purchasing properties for up to $1.5 million will be able to choose to pay an annual property tax instead of stamp duty.

The property tax will only be payable by first home buyers who choose it.

Existing stamp duty concessions for first home buyers are available for purchases of up to $800,000, and these concessions will continue.

The property tax option will be available for properties for up to $1.5 million.

Eligibility

To be eligible:

  • You must be an individual (not a company or trust)
  • You must be over 18 years old
  • You, or at least one person you're buying with, must be an Australian citizen or permanent resident
  • You or your spouse must not have previously:
    • owned or co-owned residential property in Australia
    • received a First Home Buyer Grant or duty concessions.
  • The property you are buying must be worth less than or equal to $1.5 million
  • You must move into the property within 12 months of purchase and live in it continuously for at least 6 months
  • You must sign the contract of purchase on or after the scheme commencement date (see below for details).

When Does the Scheme Commence

Eligible first home buyers who sign a contract of purchase on or after 16 January 2023 will be eligible to opt into the property tax and will not be required to pay stamp duty in order to complete their transaction.

Revenue NSW states on its website that "eligible first home buyers who sign a contract of purchase between the passage of the legislation and 15 January 2023 will be eligible to opt into the property tax. However, these purchasers will be required to pay any applicable stamp duty within the usual required periods and from 16 January 2023, will be able to apply for and receive a refund of that duty".

Information on how to apply for the property tax will be made available once the legislation is enacted.

Further information can be found in the Revenue NSW website.

Shared Equity Scheme

The New South Wales (NSW) Treasurer, the Hon. Matt Kean MP, announced the launching of the Shared Equity Scheme as part of the 2022-2023 State Budget on 21 June 2022.

The scheme is planned to begin in January 2023 and will accept applications during two financial years (2022-23 and 2023-24). There will be 3,000 places per financial year.

Revenue NSW has published the following information on its website about how the scheme will operate

What is the shared equity scheme?

The NSW Government will pay a proportion of the purchase price of a property in exchange for an equivalent ownership share of the property. The NSW Government equity contribution is up to 40 per cent of the purchase price of a new dwelling and up to 30 per cent of the purchase price of an existing dwelling.

The purchaser must have a minimum deposit of 2 per cent of the purchase price, with no lenders mortgage insurance required.

No repayments are required on the equity contribution and no rent or interest will be charged while a participant remains eligible for the scheme. Participants can make voluntary payments to progress to full ownership of their property.

Eligibility

The shared equity scheme is open to:

  • a single parent of a child or children under 18 years of age
  • a single person 50 years of age or above, or
  • first home buyer key workers who are nurses, teachers or police.

The gross income of the household must be no more than $90,000 for singles and $120,000 for couples.

The participant must be buying a home with a property price less than $950,000 in Sydney and major regional centres (Newcastle, Lake Macquarie, Illawarra, Central Coast, North Coast of NSW) or less than $600,000 in other regional areas.

The participant must be at least 18 years of age and be an Australian or New Zealand citizen, or a permanent Australian resident.

The participant must have a minimum deposit of 2 per cent of the purchase price.

The participant must occupy the property as their principal place of residence.

The participant must not own an interest in any land in Australia or overseas at the time of purchase.

The participant must not be able to service the mortgage for the property purchase without the Government equity contribution but be able to service the mortgage with a participating lender with the Government equity contribution.

Transaction costs

All purchasing and selling costs (including stamp duty) are the responsibility of the participant.

Participants in the shared equity scheme would remain eligible for First Home Buyer assistance and any duty or land tax concessions.

Ongoing obligations

To maintain eligibility, participants' ongoing obligations include:

  • Annual review: Each year following the property purchase, scheme participants will be required to complete an annual review and provide supporting information to ensure their continued eligibility for the shared equity scheme.
  • Maintenance and improvement of property: Participants are required to maintain their property and keep things in good working order. The Government must approve certain modifications or renovations so that the value of this changes can be factored into the eventual sale price of the property.
  • Responsibility for property costs: Property costs such as council rates, body corporate fees, water and home loan repayments are the responsibility of the participant.

A participant will be required to begin repayment of the Government's equity contribution in certain situations, including where they no longer meet eligibility criteria. Revenue NSW will work with participants in meeting this obligation.

If a participant's income exceeds the applicable threshold on two consecutive annual review reporting dates, they will be required to begin repayment of the Government's equity contribution.

Scheme commencement

The scheme is planned to begin in January 2023 and will accept applications during two financial years (2022-23 and 2023-24). There will be 3,000 places per financial year.

Examples

Single parent in Sydney

For an eligible single parent in Sydney buying a new home at the maximum price of $950,000, the 40 per cent equity contribution would be a maximum saving of $380,000. This equity contribution would lower monthly mortgage repayments by around $1,800 (assuming an interest rate of 4 per cent over a 30 year term).

First home buyer teacher in Wagga Wagga

For an eligible first home buyer who is a teacher in Wagga Wagga buying an existing home at the maximum price of $600,000, the 30 per cent equity contribution would be a maximum saving of $180,000. The equity contribution would lower monthly mortgage repayments by around $860 (assuming an interest rate of 4 per cent over a 30 year term).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.