The NSW government has introduced the First Home Buyer Choice scheme (FHBC Scheme) which allows first home buyers to choose between paying an upfront transfer (stamp) duty or an annual property tax. This scheme applies to new or existing homes in New South Wales up to $1.5 million or vacant land on which you intend to build a home for up to $800,000.

Currently, transfer duty is paid when you buy real estate in NSW. The amount of transfer duty you pay depends on the value of the real estate you are buying. Transfer duty is normally calculated on the purchase price and is payable within three months of the date of the contract for sale.

The FHBC Scheme allows you to pay an annual property tax instead of transfer duty that is calculated on the land value of your property, which will generally be significantly less than the purchase price of the same property.

While the FHBC Scheme may be beneficial for some first home buyers in NSW, it is important for prospective purchasers to carefully consider how long they intend to live in their first home. Purchasers who are expecting to move into another home within a short period of time may be much better off under the FHBC Scheme. However, those who intend to remain in their first home for some time may find that the transfer duty option is the better choice.

What are the eligibility requirements?

To be eligible for the FHBC Scheme, the purchaser must be:
• an individual (not a company or trustee);
• over 18 years old; and
• an Australian citizen or permanent resident.

In addition, the purchaser or their spouse must not have previously owned or co-owned residential property in Australia, or have received a First Home Buyer Grant or other NSW transfer duty concessions.

The property must be worth $1.5 million or less and the purchaser must move into the property within 12 months of purchase and live in it continuously for at least 6 months.

The contract for the sale of the property must be signed on or after 11 November 2022. If you signed an off-the-plan purchase contract on or after 11 November 2021, you can opt-in to the FHBC Scheme, provided the purchase has not settled before 11 November 2022.

Those looking to make use of the FHBC Scheme should be aware that once you have made the decision to opt-in to the FHBC Scheme, you cannot change your mind once you are the owner of the property. However, you are able to change your mind and seek a re-assessment to pay the transfer duty up until completion of your purchase.

Other assistance schemes

In addition to the FHBC Scheme, there are other government initiatives available in NSW to assist first home buyers. For example, the First Home Owner Grant (FHOG) provides a one-off payment of $10,000 to eligible first home buyers who purchase or build a new home that meets certain criteria. However, those who have received a FHOG or other duty concessions will not be eligible for the FHBC scheme.

Another initiative available in NSW is the First Home Buyers Assistance scheme (FHBAS), which provides exemptions or concessions on transfer duty for eligible first home buyers. To be eligible for the FHBAS, first home buyers must meet certain criteria. Purchasers will be eligible for a full exemption if the value of the new or existing home is less than $650,000, or less than $350,000 for vacant land. Transfer duty concession is available where the value of the new or existing home is between $650,000 and $800,000, or the value of the vacant land is between $350,000 and $450,000. The property must also be used as the principal place of residence, and the purchaser must not have previously owned property in Australia.

Overall, the FHBC Scheme is a valuable initiative for first home buyers in NSW. However, it is important for first home buyers to carefully consider their financial situation and seek independent legal and financial advice before entering into a contract to purchase a property.

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This publication is produced by Pigott Stinson. It is intended to provide general information only. The contents of this publication do not constitute legal advice and should not be relied upon as legal advice. Formal legal advice should be sought from us in respect of the matters set out in this publication. Liability limited by a scheme approved under Professional Standards Legislation.