NSW scraps First Home Buyer Choice program

The NSW Government has scrapped its flagship housing affordability policy, the First Home Buyer Choice program. The move notably contrasts with the treatment contemplated for commercial and industrial property in the Victorian State Budget: as one Government ends stamp duty in favour of an annual property tax, another Government goes the opposite way.

For prospective first homebuyers in NSW, the trade-off is that the monetary thresholds to be exempt or receive a concession from stamp duty are substantially increasing. From 1 July 2023, the stamp duty exemption threshold for eligible first homebuyers will increase from $650,000 to $800,000, and the concessional rate will increase from $800,000 to $1 million.

This article details the end of the short-lived Choice program and sets out the Government’s new housing affordability measures.

What is the Choice program and why is it ending in NSW?

Beginning on 16 January 2023, the Choice program was a housing affordability scheme that offered eligible first homebuyers a choice between one of two schemes:

• pay stamp duty upfront (as per usual), with access to a full exemption for homes purchased for $650,000 or less, and a concessional rate for homes purchased for $800,000 or less (known as the ‘First Home Buyer Assistance scheme’); or
• pay stamp duty in instalments overtime for 10 years on homes valued up to $1.5 million.

If a purchaser chose the instalment option, the rate for the 2022–23 financial year was $400 plus 0.3% of the land value. If a homeowner sold their home before they had paid off the tax, then the balance had to be paid before settlement to the new owner.

An ambitious policy move, the Choice program represented a significant step in moving away from an inefficient stamp duty system, which waxed and waned with the housing market. However, the new Government has chosen to end the Choice program after less than 6 months, determining the concessions to be too generous to certain purchasers. About half of all duty waived in NSW was enjoyed by only 13% of first homebuyers who spent $1–1.5 million on their first home under the Choice program (which is more than the median Sydney house price of about $1 million). 

By abandoning the Choice program in this form and increasing the duty exemption and concession thresholds, the Government is focusing its assistance on lower income earners. However, the decision to scrap it entirely, instead of just adjusting the instalment rates and eligibility criteria, suggests other concerns may have played a part in ending the scheme.

Which avenues have Victoria and South Australia taken?

In contrast, Victoria is going the other way. From 1 July 2024, a purchaser of commercial or industrial property will have a choice to pay stamp duty upfront or in instalments. This is planned as a transitional measure before stamp duty is replaced with an annual property tax for commercial and industrial property.

In South Australia, a new exemption has been recently announced for first homebuyers purchasing a home worth up to $650,000, but no property tax option was included. The future of stamp duty therefore appears unsettled as various States and Territories experiment with different approaches.

What's changing in NSW?

New thresholds for stamp duty exemptions and concessions

In exchange for abandoning the Choice program, the NSW Government is increasing the stamp duty:

• exemption threshold from $650,000 to $800,000; and
• concession threshold from $800,000 to $1 million.

This new threshold will apply to all contracts of sale executed on or from 1 July 2023*.  However, any first homebuyer who elected to apply the instalment option under the Choice program on or before 30 June 2023 may continue to do so.

If the new rules work out better, can the contract be cancelled and re-executed?

No, the NSW Government has guarded against this. 

Under the new rules, if a new agreement is entered into on or after 1 July 2023 that ‘replaces’ a former agreement entered into on or before 30 June 2023 in respect of ‘substantially the same property’, then the new agreement is taken to have been entered when the former agreement was entered into.

However, there is little guidance as to what constitutes a ‘replacement’ agreement as opposed to a new agreement. For example, it is not clear whether an agreement that formalises a prior non-binding agreement (such as a heads of agreement) to buy property entered into on or before 30 June 2023 would be a ‘replacement’ of the non-binding agreement.

Eligibility criteria

The new rules increase the period a purchaser must reside in the new home from 6 months to 12 months in order to be eligible for the exemption or concession (including for the First Home Owner Grant). This is to better target genuine owner-occupiers, rather than investors.
The other eligibility criteria remain the same as under the Choice program, which include: 

• the buyer and their spouse must not have owned a residential property in Australia and not received a First Home Buyer Grant or duty concession;
• the buyer must be a person who is 18 years or older, and cannot be a company or trust;
• the buyer, or at least one person they are buying with, must be an Australian citizen or permanent resident;
• the buyer must move into the property within 12 months of purchase; and
• the monetary thresholds must be met.

More information from Maddocks

For more information, contact Maddocks on (03) 9288 0555 and ask to speak to a member of the Commercial team.

Related document packages

• Power of Attorney (Financial) NSW
• ClearWill Online
• ClearWill with Testamentary Trusts

*The First Home Buyer Legislation Amendment Bill 2023 (NSW) received Royal Assent on 8 June 2023