Stamp duty is a substantial upfront cost that adds up a substantial amount for first-time home buyers. According to the government, stamp duty alone adds up to more than two years of savings for first-time home buyers.

What Is Stamp Duty?

Stamp duty is a form of tax that is charged on the purchase of property. This excess duty is paid at the time of investment. Unlike in many other countries, this duty in Australia is dictated by the state government rather than the federal government.

The Proposed Plan

Property specialists have been suggesting the removal of stamp duty to curb the rising housing prices for years now. The middle and lower-middle-class working families are having to go deep into their pockets just to own their new home. 

First-time home buyers would now be able to take advantage of these considerable tax benefits of living in new homes. Under the proposed plan, first home buyers, purchasing a property for up to $1.5 million can pay an annual fee of $400 with 0.3 per cent of the land value. 

This is a significant shift from the traditional property taxation system. Since the burden of stamp duty is off the shoulder, the NSW government estimates that more people will be ready to buy their first home.

Stamp duty varies from state to state. Usually, they revolve around 3-4 per cent of the total property value. There are certain exemptions of this duty for first-time home buyers. previously, properties worth less than $650,000 are exempted from stamp duty. Any property worth less than $800,000 will have a further reduced rate.

Under the current scheme, first-time home buyers can opt out of paying this bulk amount of stamp duty by paying an annual fee of $400 plus 0.3% of the land value yearly.

For example, buying a 1.35 million dollar home with a land value of $810,000 would have a stamp duty of around $59,000. Holding on to the property for 20 years one would pay around $56,000. First-time home buyers will not have to pay the huge $59,000 initially. Thus, this scheme will be a huge relief for first-time home buyers. The government estimates that the current scheme will help many NSW tenants to buy into their 1st home where they won’t have to pay the huge upfront cost.

The Challenge Of First-Time Home Buyers

To buy new homes the average individual needs to pay a hefty premium of stamp duty. For most first-time home buyers, the crucial challenge is to come up with the initial deposit. 

A median NSW residence has to pay $20,000 to $ $35,000 in stamp duty to buy their first home. 

This huge sum adds up to about 2 to 3 years of savings to get their home. Thus replacing the stamp duty will allow them to get into their new home a bit earlier and certainly with a much smaller deposit.  

Purchasing Your First New Home

Buying your first new home can be a time-consuming and hectic experience. With all the new legislation and proposed plans, you should always ask for an expert opinion to help you plan your first property purchase.  With a bit of help and advice from SMG’s experienced team of professionals, you won’t have to worry about the whole first home purchasing process.