Transfer Duty NSW | Ultimate Transfer Duty Guide in 2023
Transfer duty (previously known as stamp duty) payable on a new home is a significant cost to factor into your buying budget. But it can also be a source of confusion for home buyers. In this article we explain what transfer duty is, how it’s calculated, concessions and exemptions, and how it applies to off the plan apartments in NSW.
What does off the plan mean?
Buying off the plan means committing to buy a property, usually an apartment, that’s still in the planning stages or partially constructed. It’s an option that can offer considerable advantages especially when it comes to transfer duty.
What is transfer duty?
This is a tax imposed by the NSW government on certain transactions, including the purchase of property. If you thinking of buying off the plan, understanding transfer duty can help you budget more effectively for your new home or investment property.
How is transfer duty calculated?
Transfer duty typically applies when a property is transferred from one owner to another.
In NSW, the duty is calculated based on the value of the property being transferred, which is typically the agreed selling price. The more you pay for a property, the higher the transfer duty payable.
When purchasing off the plan, transfer duty is calculated based on the contract price, which is the price agreed upon between the buyer and the developer. This might be different from the market value of the property, which is the amount that the property would be expected to sell for on the open market.
How transfer duty applies to residential property in NSW
The transfer duty rate imposed on off the plan purchases is the same as for other types of residential property transactions.
The current rates of transfer duty in NSW (effective 1 July 2023) are as follows: [1]
| $0 to $16,000 | $1.25 for every $100 (minimum $10) |
| $16,000 to $35,000 | $200 plus $1.50 for every $100 over $16,000 |
| $35,000 to $93,000 | $485 plus $1.75 for every $100 over $35,000 |
| $93,000 to $351,000 | $1,500 plus $3.50 for every $100 over $93,000 |
| $351,000 to $1,168,000 | $10,530 plus $4.50 for every $100 over $351,000 |
| Over $1,168,000 | $47,295 plus $5.50 for every $100 over $1,168,000 |
[1] Source: Revenue NSW
How much transfer duty will I pay?
As a guide an apartment worth $650,000 would attract transfer duty of $23,985. On an apartment costing $800,000, this rises to $30, 735. And if you pay, $990,00 for an apartment, the duty can add up to $39,285.[2]
But these rates don’t always apply if you are a first-home buyer. Various concessions and exemptions to transfer duty are now available in NSW. For example one-bedroom apartments at Carson on the Park, ALAND’s development in St Mary’s, are priced at $495,000 – well under the $800,000 exemption ceiling set by the state government.
Many first home buyers have taken advantage of this transfer duty holiday at St Mary’s which has delivered them a $17,340 saving on a one-bedroom apartment.
To see what you might qualify for download the information brochure here.
[2] Source: NSW Government Media Release
Transfer duty rules for off the plan purchases
In NSW, if you buy a home off the plan which you intend to use as your main residence, you can defer paying transfer duty for up to 12 months after you sign the agreement to buy, or until the property is completed or handed over, whichever comes first. This gives you extra time to save for any duty that may apply to your purchase.
Property value and thresholds
The tables below show the First Home Buyer Assistance Scheme (FHBAS) thresholds based on the date you exchanged contracts.
Apartments or houses purchased onn or after 1 July 2023:
| Property value | Exemption | |
| New and existing homes | Value is equal to or less than
$800,000 |
Exempt
You can apply for a full exemption from transfer duty. |
| Value is above
$800,000 and less than $1 Million |
Concessional rate
You can apply for a concessional transfer duty rate. |
NSW government changes to transfer duty
The NSW Labor Government lifted the threshold for transfer duty exemptions for first home buyers from $650,000 to $800,000 and transfer duty concessions from $800,000 to $1 million, effective from July 1, 2023. This means more first home buyers save on the duty payable on a property.
According to NSW Premier Chris Minns around 84% of future first-home buyers in the state will benefit from the new arrangements – replacing the old First Home Buyer Choice scheme.
“I want more singles, couples and families realising this dream [of home ownership],” he said.[3]
[3] Source: yourmortgage.com.au
What is an ‘eligible’ first home buyer?
In NSW, transfer duty concessions are offered under the First Home Buyer Assistance Scheme (FHBAS).
To qualify as an eligible first home buyer and be entitled to a transfer duty exemption or savings under the scheme, you must be purchasing the first home you or your spouse have owned or co-owned in Australia, although there are some exceptions.
You must also move into the property within 12 months of purchase and live there for at least twelve continuous months. In addition, you must be an Australian citizen or a permanent resident of Australia and be at least 18 years of age.
Strategies to minimise transfer duty
As transfer duty can be a major purchase cost, it is worth exploring opportunities to reduce the impost. Here’s how it can be done.
Reduce the value of the property
The less you pay for a property, the lower the transfer duty. The duty is paid on the value of the land and building at the date of the contract of sale. If construction is yet to commence – as in the case of an off the plan property – the dutiable value can be less than if it was a fully finished building.
Capital Gains Tax / Land tax
Applicable to investment properties, capital gains tax can apply when you sell an asset such as property for more than its cost price. However, if you hold the asset for more than a year, you may be entitled to claim a 50% discount on the profit on sale for tax purposes.
Importantly, capital gains tax does not apply to your personal home. [4]
Similarly, in NSW, land tax is not charged on your private home though it does apply to investment properties.
[4] Source: Australian Taxation Office
When is transfer duty payable?
In NSW, if you buy a home off the plan, which you intend to use as your permanent residence, you can defer paying the standard transfer duty for up to 12 months after you sign the agreement to buy, or until the property is completed or handed over, whichever comes first.
As an investor, duty is payable within three months from signing the contract of sale.
Other fees and charges associated with off the plan purchases
As with buying an established property, buying off the plan can come with other costs. These typically include legal or conveyancing fees, and loan application fees if you need to finance the purchase.
Conclusion
Transfer duty is an important cost to consider when purchasing off the plan properties.
Understanding the rules and calculations for transfer duty can help you budget more effectively and ensure you are not caught off guard by unexpected costs.
If you are considering an off the plan purchase in NSW, it is important to work with an experienced conveyancer or solicitor who can guide you through the process and help you to understand your rights and obligations as a buyer.
To find out more information about transfer duty when buying off the plan, get in touch with the team at ALAND. With the right advice and support, you can discuss your options to make a confident and informed decision about your off the plan property purchase.