Remember back in November when the First Home Buyer Choice became a thing and first homebuyers across Australia rejoiced, because it meant getting one foot on the property ladder way earlier than expected? Well, with more first time buyers getting in contact hoping to take advantage of this scheme, I thought we’d go into a little more detail.  

Back when this initiative was announced, we talked about the two options homebuyers would be given: to pay Stamp Duty or the annual property tax. If you’re finding it all a bit overwhelming trying to work out which one is best for you, read on! 

Stamp duty vs annual property tax

Stamp duty is an upfront payment. You pay this when you buy your home, so not only would you be saving for a deposit but your stamp duty, too. 

Stamp duty is calculated as a percentage of your property’s purchase price or the current market value – whichever is higher at the time of purchase. 

Annual property tax on the other hand is payments based on the land value of the purchased property paid, well, annually. To start, you’ll need to know the property tax rates for 2022-2023 and 2023-2024, which will be:

• $400 plus 0.3% of land value for properties with owner-occupier
• $1500 plus 1.1% of land value for investment properties. 

With this information in mind, let’s imagine you’ve got your eye on a $1.5 million property. If you choose to pay the annual property tax, you’ll be looking at $400 per year plus 0.3% of the land value of the purchased property, which equates to $4,900 in total each year for a property under the $1.5 million threshold. 

But if you want to talk Stamp Duty on a more affordable home – let’s say a property worth $700,000, your upfront stamp duty will cost you approximately $10,435 on top of your deposit, while your annual property tax will cost you only $1,600 per annum (assuming your land value is $400,000). 

Are you seeing a pattern yet? Let’s take it further. 

Choosing an option

You can see that the higher the value of the home, the more you will be paying on either upfront stamp duty or annual tax payments. So what you need to do next is work out, can you afford the large upfront sum required when opting for stamp duty, or are you willing to pay more over a longer period of time in smaller chunks? 

While the First Home Buyer Choice is certainly beneficial to many first homebuyers, it is especially useful to those finding it difficult to save for that almighty deposit – especially with the current cost of living going through the roof! For this reason, many first time buyers will opt to remove the stamp duty so they can finally get their foot on the property ladder once and for all. This is especially helpful if you aren’t committed to living in the property long-term. 

Speaking of which, the length of time you intend to live in the property you are purchasing will have influence over which option you take. When you plan to retain the property for the long-term and can afford the stamp duty, forking out the finances on that large upfront sum may actually be more beneficial to you than paying annual property tax over a long period of time. 

Still trying to get your head around stamp duty and annual property tax? You’ve come to the right place! Our Australian buyers agency will walk you through the reforms to find the best option for you. Give Kitty & Miles a call on (02) 8916 6172 or email our team at support@kittyandmiles.com.au to schedule in a call or meeting. We will happily take the guesswork out of your property buying experience!