In the NSW Budget handed down on 21 June 2022, the State Government announced plans to make some transfer duty optional from January 2023. However, the scope of the proposal is quite limited at this stage.
The key features announced are as follows.
- First home buyers purchasing properties for up to $1.5 million on or after 16 January 2023 will be able to choose to pay an annual property tax instead of stamp duty.
- There will be a higher rate of annual property tax for investors than for owner occupiers, with rates indexed annually to wage growth.
- The tax will be based on a financial year, unlike land tax, which is based on a calendar year.
- The existing First Home Buyers Assistance Scheme duty concessions for properties valued up to $800,000 will remain.
- The property tax will only be payable by first home buyers who choose it, and will not apply to subsequent purchasers of a property.
Of course, legislation must first be enacted and the details remain to be seen, including the transitional provisions that will apply.
If the announcements become law, by next January NSW will have the existing transfer duty regime, the existing land tax regime and a new annual property tax all running in parallel.