Stamp duty alternative not a straightforward solution: CA ANZ

“This first home buyers’ incentive is definitely not ‘one size fits all,’ and what’s good for one person may not be the same for someone else,” she said. 

Ms Franks urged buyers to conduct thorough research into the tax and consider their personal finances before jumping into a decision.

“There are many factors which will determine whether an individual is better off selecting stamp duty or property tax, including how long you intend to own the property, the type of property you purchase, whether you are going to live in the property or rent it out, and which other concessions at the time of purchase you may be eligible for,” she said.

She added that while stamp duty is a large lump sum imposed at the time of purchase, annual property taxes position themselves as an ongoing tax liability, “which, like rates, is based on land value and is an annual impost”.

“Both property tax and rates can increase due to increases in land value and tax rates,” she said.

Despite the government promising property tax increases will be capped at 4 per cent per annum, similar to council rates, Ms Franks did warn that “with all levels of government needing funds to finance services and debt and local and state governments relying heavily on the taxation of land, there may be pressure to increase future tax rates”.

First home buyers should note that council rates across NSW are likely to rise, with proposals in some areas potentially inciting increases of 28 per cent over four years.

Further to this, Mr Franks outlined first home buyers must be aware that any stamp duty savings could potentially be absorbed by higher housing prices. She acknowledged that “it [is] fantastic to get a foot in the door of the property market, [but] care needs to be taken to ensure first home buyers do not overreach their financial capacity to serve their housing debt in the current environment of increasing interest rates”.

In order to mitigate the potential financial risks posed by these decisions, she explained that “crunching the numbers with your accountant is a great way to ensure that your dream home does not turn into a nightmare”. 

Additionally, the NSW government has released a calculator that assists prospective first home buyers weigh up the financial differences between stamp duty and the annual property tax.

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