Choosing between stamp duty or land tax

Since its introduction last November by the NSW State Government, we been asked many questions about the new First Home Buyer Choice scheme

Most enquiries to our team revolve around whether it’s cheaper to pay the slug of stamp duty (the conventional, upfront levy on a property purchase) or opt for the new, more gradual land tax.

Unfortunately, there’s no simple answer. 

Why? Put simply, the land tax allows you to sidestep the single slug of stamp duty which is usually in the tens of thousands of dollars. However, the multi-year nature of the land tax means you could be paying more in the long term.

Another common question our agents face is, “Why? What’s this new land tax trying to achieve?”

To help you, we’ve listed the key points as a starting point in understanding the new choice, but you should seek professional financial advice to assess your personal circumstances. 

  • The new land tax is available only to first-home buyers who spend less than $1.5 million on a property or $800,000 on vacant land.
  • Land tax is $400 per year, plus 0.3% of the land value of your home. If values move up or down, so theoretically will your land tax. You can pay your bill quarterly.
  • Are we talking big bucks for stamp duty? Yes: Canstar says that if you purchased an $850,000 property, your stamp duty would be more than $33,000.
  • The enormous cost of stamp duty dissuades many young Australians from entering the market. Spending several years saving and then finding a wedge of cash taken by the state government is, to say the least, unappealing. The land tax option is designed to encourage buyers by reducing the upfront cost. It will also allow them to upsize down the track without another large stamp duty bill.
  • To qualify for this scheme, you must be a citizen or permanent resident, be buying your first home, move into the property within 12 months and live there for another six. Trusts and companies do not qualify.
  • As a first-home buyer, you should be aware there are other schemes that allow you to avoid paying full stamp duty. So make sure you research all the grants and programs available from the state and federal governments. 

NOTE: The information in this article is general in nature and as such is provided as an overview  only. Always consult your financial advisor or accountant for advice specific to your personal circumstances.