‘Factor in’ property tax repayments, MFAA warns brokers

For the first time in Australia, first home buyers in NSW will be given the choice between paying a smaller annual property fee or a large upfront stamp duty on their first property, the government explained.

Premier Dominic Perrottet said the First Home Buyer Choice would be a game changer for first home buyers, helping families get the keys to their first home sooner.

“The great Australian dream of home ownership just got much easier for a generation of young families,” Mr Perrottet said.

“For the first time we will provide first home buyers with a choice, helping thousands of people to shave around two years off the time needed to save for a deposit.

“People can now save huge sums of money on the biggest purchase of their life.”

From Saturday (12 November), thousands of first home buyers will be able to “unlock the dream of home ownership sooner”, the state government highlighted.

Brokers need to be across the changes for clients

Speaking exclusively to The Adviser, MFAA chief executive Anja Pannek said: “For mortgage brokers, they need to be aware that eligible first home buyers — those purchasing a property under $1.5 million — will be able to opt into the annual property tax.”

“If they choose to do so, property tax repayments will need to be factored into lenders’ serviceability assessments.

“Also, while the policy becomes operational on 16 January 2023, eligible first home buyers purchasing a property from Saturday 12 November 2022 to 15 January 2023 will be able to switch to the annual property tax and have their stamp duty refunded.

“So, brokers should be talking to their clients about these changes now!”

Impact and implications for the industry

Asked how it affects broking industry professionals and to what extent they will welcome the changes, Ms Pannek stated: “Mortgage brokers have, and continue to, be trusted to assist and support first home buyers - and brokers should expect their clients to ask about the policy change.”

“While we caution our members not to provide tax or financial advice, our members are able to provide significant support and assistance

to their clients including explaining how the different property tax options influence lenders’ serviceability assessments.

“Our key recommendation on this policy was that [the] NSW government should support first home buyers with information and resources to make their decision, so it was pleasing to see that the government release an online First Home Buyer Choice calculator,” she explained.

Ms Pannek continued: “We suspect that many eligible first home buyers opting into the property tax will bring forward their property purchases, [with] NSW Treasury modelling suggesting by up to two years.

“As the peak body for the mortgage and finance broking industry and – one of the most systemically important industries in the NSW housing economy – the MFAA was consulted significantly on the NSW Government’s property tax reform.

“Also, in our role as the peak body, we provide support and guidance to our members on significant changes within the property market.

“We are preparing resources for our members on aspects of the policy change they need [to] be aware of, and keep front of mind when they are working with clients who are first home buyers in New South Wales,” she said.

An opportunity to decide for themselves

NSW Treasurer Matt Kean said the new law would help more young people enjoy the financial security that comes with home ownership.

“First Home Buyer Choice will significantly reduce upfront costs, reduce the time needed to save for a deposit and will see the majority of eligible first home buyers paying less tax overall,” Mr Kean said.

“We are giving people the opportunity to decide for themselves what best suits their financial situation. Those buying a home to live in for life can still choose stamp duty, but for many, paying an annual tax for the limited time they actually live in the property will make more sense.”

First Home Buyer Choice will be available for dwellings costing up to $1.5 million, the government confirmed.

For the purchase of vacant land intended for the construction of a first home, the price cap will be up to $800,000, it stated.

The program is uncapped and will be available for every eligible first home buyer who wants to access it, it added.

Notably, the government has allocated $728.6 million to First Home Buyer Choice over the next four years.

The First Home Buyer Choice is a key component of its $2.8 billion Housing Package announced at the 2022-23 NSW Budget that “aligns with the Housing 2041 vision”, it stated.

[Related: NSW shared equity gets the green light]