Introduced to the NSW Parliament this week, the legislation will allow first home buyers to choose between existing stamp duty charges or an annual property tax fee.

“The NSW Government is hoping this legislative change can pass the Parliament before it rises before the election in March, however it is possible it will be delayed in the House and become an election issue alongside other cost of living measures. 

CA ANZ Senior Tax Advocate, Susan Franks said that while the temptation will always be there to avoid further up-front costs when purchasing a first home, buyers need to do their research and consider their personal circumstances. 

“This first home buyers’ incentive is definitely not ‘one size fits all’, and what’s good for one person may not be the same for someone else,” Ms Franks said. 

“There are many factors which will determine whether an individual is better off selecting stamp duty or property tax, including how long you intend to own the property, the type of property you purchase, whether you are going to live in the property or rent it out, and which other concessions at the time of purchase you may be eligible for. 

“Stamp Duty, while a significant impost at the time of purchase, is a one-off fixed amount. In contrast, property tax is an ongoing tax liability – which like rates is based on land value and is an annual impost. Both property tax and rates can increase due to increases in land value and tax rates. 

“The NSW Government has announced that property tax increases will be capped at 4 per cent per annum which is like the cap on your council rates.    

"But with all levels of government needing funds to finance services and debt and local and State governments relying heavily on the taxation of land, there may be pressure to increase future tax rates. 

“First home buyers should be aware that Local Council rates across NSW are likely to rise. In some areas there are proposals for council rates to increase 28 per cent over 4 years.   

“First home buyers also need to be wary of stamp duty savings disappearing into higher housing prices.  While it fantastic to get a foot in the door of the property market, care needs to be taken to ensure that first home buyers do not overreach their financial capacity to service their housing debt in the current environment of increasing interest rates.  

“Crunching the numbers with your accountant is a great way to ensure that your dream home does not turn into a nightmare,” Ms Franks said.