Understanding the First Home Buyer Choice scheme in NSW: factors to consider
The New South Wales (NSW) government recently introduced changes to stamp duty legislation known as the First Home Buyer Choice scheme. This scheme provides first home buyers who meet certain eligibility criteria with the option to either pay upfront stamp duty upon purchasing their first home or pay an annual property tax. As you consider accessing the scheme, it's important to carefully evaluate the following factors:
Accessing the scheme will have an impact on your borrowing capacity. Opting to pay annual property tax means that you will have an additional annual expense that needs to be factored into your financial position, which will in turn reduce your home loan borrowing capacity.
The duration for which you intend to own the property can also affect your overall financial obligations. Choosing to pay annual property tax may result in lower overall savings in the long run, purely in terms of dollars. The longer you keep the property, the more you will pay in annual property tax, potentially impacting your financial goals.
Will the property become an investment property in the future? The scheme allows for conversion of the property to an investment property after meeting certain criteria. It's important to note that the property tax rate for an investment property is generally higher than for an owner-occupied property.
If you do plan to convert the property to an investment property down the track, the ongoing annual property tax may be deductible for tax purposes. On the other hand, upfront stamp duty paid for a property is considered a capital expense and is not deductible. This is an important factor to consider when making your decision.
Opting not to pay upfront stamp duty gives you the option to reduce the size of the loan you are applying for. For example, if you avoid paying $50K in stamp duty, you can reduce your loan by the same amount, which can result in lower interest payments over the life of the loan. It's worth considering the long-term implications on your budget and financial plans.
At Beyond Broking, we understand the importance of crunching the numbers to make informed decisions. If you would like expert advice on the impact of this legislation on your budget and plans, feel free to reach out to one of our friendly brokers. We are more than happy to provide you with the best options tailored to your unique situation.
Note: the First Home Buyer Choice scheme is subject to change based on the election of the Labor Government in NSW, reverting to new stamp duty concessions.