How to decide whether annual property tax NSW or stamp duty is best for you

The short version

• First Home Buyer Choice, the scheme that let first home buyers swap stamp duty for an annual property tax, closed to new buyers for contracts signed after 30 June 2023.
• If you opted in before then, you keep paying the annual property tax on that home, and nobody else can join.
• What first home buyers get now is the First Home Buyers Assistance Scheme: no stamp duty on a home up to $800,000 and a concession up to $1 million. For vacant land it's $350,000 and $450,000.
• The $10,000 First Home Owner Grant for new homes up to $750,000 is still running.
• The Sarah example further down shows how the old scheme worked and is kept for the record.

For a short window in 2023, first home buyers in NSW could choose between paying stamp duty (known here as ‘transfer duty’) or an annual property tax on a home worth up to $1.5 million. That window has closed. According to Revenue NSW, Support for first home buyers is changing, First Home Buyer Choice ended for contracts signed after 30 June 2023, and the annual property tax now only applies to the buyers who opted in while it was open.

So if you're searching for "annual property tax NSW" in the hope of dodging stamp duty, the option is gone. What replaced it is a higher stamp duty exemption for first home buyers, which we'll get to below. The old scheme details live on at First Home Buyer Choice on the Revenue NSW site, under previous schemes.

A reminder about stamp duty

Usually costing tens of thousands of dollars, this one-off levy can be prohibitive, especially for first home buyers who often struggle to save a deposit in these times of rapidly rising prices.

Stamp duty is a form of taxation that has been around since the 1600s in some parts of Europe. Many see it as an out-of-date levy that’s onerous for individuals, particularly those who want or need to move homes several times across their life (whether for work reasons or changing personal and family circumstances).

And, as it’s hard to predict how many people will buy and sell property each year, stamp duty is also an unpredictable revenue stream for governments.

The Grattan Institute puts it this way: “Stamp duty is a bad tax because it discourages home owners from moving house as their lives change, as doing so would mean having to pay stamp duty a second time.”

To learn more about stamp duty, see our guide here or talk to one of our team today.

Why was property tax pitched as better than stamp duty?

Paying a smaller property bill each year, rather than a one-off bigger payment on buying a home, reduces the entry barrier to owning a home. 
 
An annual property bill will usually sit in the low thousands of dollars. That’s far easier to budget and save for than an upfront cost of tens-of-thousands of dollars for stamp duty.

That was the theory, and for the buyers who opted in it still holds. They pay the annual bill and never paid duty on that purchase. For everyone buying today, the question is moot, so the rest of this section is here for context.

How was property tax calculated?

Property tax is often referred to as ‘land tax’ because it’s based only on the value of the land a home sits on. This makes it a little harder to understand and estimate as, in general, most people are only aware of the cost of land when buying vacant land (one of the many benefits of a house and land package).

A. Stamp duty = $59,125 upfront
B. Property tax = $2,830 per year. 

If Sarah lived in the home for less than 20 years before moving, she would be financially better off with the property tax option. Sarah's numbers are from 2022 and they're here to show how the sums worked under the old scheme.  

Buyers of apartments were even further ahead as the land value on apartments is generally significantly less than for a home of the same overall cost.

The NSW Government's comparison calculator has been taken down along with the scheme. If you're weighing up costs on a new build, our team can walk you through what duty and grants apply to your block and design, so talk to them today.

Why was the choice between stamp duty and property tax only available to first home buyers?

The NSW Government initially flagged the intention to make the choice between stamp duty and property tax available to a much larger segment of the population, up to 80 per cent of all home buyers.

Offering it to first home buyers first was a way to trial the scheme with the people most affected by upfront stamp duty. The trial never got any further, and the scheme was wound up a few months after it opened.

What do first home buyers get instead?

Does anywhere in Australia still offer an annual property tax instead of stamp duty? 

What should I do now?