First home buyers in New South Wales can expect big stamp duty savings through reforms which were delivered in the 2017 budget and commenced on 1 July 2017.
The new package is anticipated to assist many potential purchasers by improving housing affordability across the state.
Policies have also been introduced to target our growing population by boosting housing supplies in the right areas.
Would-be first home owners are encouraged to read on – these changes may bring the dream of owning your own home into clearer focus.
How can first home buyers benefit?
Entering the property market may now be more attainable for many first home buyers.
The First Home Buyers Assistance Scheme provides concessions and exemptions from stamp duty for eligible purchasers.
Stamp duty has been abolished on all homes (new and existing) with a purchase price of up to $650,000 for eligible first home buyers. This represents considerable duty savings – $24,740 on a $650,000 purchase.
Concessions are also available on homes priced between $650,000 and $800,000 for eligible buyers. The concessions will be calculated on a sliding scale and gradually decreased as the property value nears $800,000.
No duty is payable on vacant land to the value of $350,000 to be used to build a first home with concessions available for land valued between $350,000 and $450,000.
The First Home Owners Grant (New Homes) provides eligible first home buyers with a one-off grant of $10,000 if building a new home to the value of $750,000, or if purchasing a new property to the value of $600,000.
Am I eligible?
The stamp duty exemptions and grants apply to contracts entered on or after 1 July 2017.
A first home purchase means a property which you (or another eligible purchaser) will occupy for a continuous period of six months, within twelve months of settlement. Exemptions from this requirement apply for certain Australian Defence Force personnel.
To qualify, purchasers must be natural persons (not purchasing through a company or trust) and at least 18 years of age. The purchaser and purchaser’s spouse or de facto partner must not have previously received a concession or exemption under a First Home Buyers Scheme, or owned residential property in Australia unless the property was held solely as an executor or trustee.
At least one of the purchasers must be an Australian citizen or permanent resident at the time of the contract or transfer.
Applicants will need to meet Proof of Identity requirements and complete the relevant declaration.
Further savings and changes
Insurance duty on lenders’ mortgage insurance has been abolished for all borrowers, representing considerable savings, not just for first home buyers.
Mortgage insurance generally allows borrowers with less than 20% deposit to obtain a home loan. The insurance protects the lender if the borrower cannot repay the loan and the property needs to be sold. With the elimination of duty, buyers who are required to take out mortgage insurance for a home valued at $800,000 will be around $2,900 better off.
Speedier development approval processes and plans to build compact ‘smarter’ homes in appropriate medium-density areas are expected to improve housing supply and affordability, particularly for those first entering the market.
The State Government has also budgeted for significant funding boosts for infrastructure and capital works to support increased demands by additional housing supplies.
Why introduce the incentives?
The reforms aim to alleviate some of the competition between investors and first home buyers who are generally hard-pressed to buy property in a competitive market.
By increasing the incentives for first home buyers and hitting certain investors who buy residential property with higher taxes and duties, it is hoped that the playing field might end up a little more even.
For foreign investors, the surcharge on stamp duty has doubled from 4% to 8% and land tax has increased from 0.75% to 2%
Investors of off-the-plan properties, whether local or foreign, will now need to pay stamp duty within three months of exchanging contracts rather than deferring payment for fifteen months, as is generally the case for off-the-plan purchases.
Off-the-plan purchasers intending to use the property as their main residence will still be entitled to defer payment of stamp duty for fifteen months from exchange.
Whether you are a first home buyer or investor, it is important to understand the impact of stamp duty and taxes on a potential property purchase.
First home buyers are encouraged to do the calculations to see if now is the right time to get into the property market.
Your lawyer can assist in determining your eligibility for stamp duty concessions and grants and help you with the conveyancing process.
If you or someone you know wants more information or needs help or advice, please contact us on (02) 6621 2481 at Lismore, Ballina on 02 6686 2522 or Byron Bay on 02 6680 8525 or email [email protected].