After passing parliament last year, it enables first home buyers to choose between paying stamp duty or an annual land tax on properties up to $1.5 million.
Premier Dominic Perrottet launched the government's housing affordability scheme today. (Nine)The premier said it was a "great day" for first home buyers in NSW and marked "new thinking" by the Coalition government.
From today, people who bought from November 11 can now opt into the scheme to gain a refund.
The state government estimates up to 2500 people will apply for a retrospective refund on their stamp duty and pay an annual fee instead.
A homeowner will pay $400 plus 0.3 per cent of the land value each year.
Perrottet said more than 56,000 people have accessed the government's online calculator, which works out the difference between paying stamp duty and land tax.
"Our plan means first home buyers will shave years off the time needed to save for a property and will help them achieve their home ownership dreams," he said.
"This will be a game-changer for first home buyers.
"The Liberal and Nationals are backing first home buyers to get the keys to their first home sooner."
Labor has opposed the reform, announcing it would scrap the scheme if elected in March.
Here's everything we know about the scheme.
What is it?
The First Home Buyer Choice scheme lets those buying their first property to opt out of paying stamp duty upfront in exchange for a smaller annual tax.
The scheme aims at reducing the cost of entering the property market by removing stamp duty - which can be a massive extra expense on top of the cost of a house.
It means first home buyers will be able to opt in for an annual property tax plus a percentage of the land's value instead of a lump sum payment.
From today, first home buyers in New South Wales will be able to choose between an annual property fee or an upfront stamp duty payment. (Supplied/Domain)Who is eligible?
If you're buying your first home and you're over 18 - you're eligible.
The home has to be $1.5 million or less, you must be an Australian citizen or permanent resident, and you have to move into the house within the first year and live in it for at least six months.
How does it work and what has changed?
Under the new program, you can choose to instead pay an annual tax of $400 plus 0.3 per cent of the land value (not the purchase price).
Previously when you bought a property in NSW you paid a one-off stamp duty on the purchase price.
Can I see some examples?
Someone buying their first home in Sydney for $830,000 with a land value of $265,000 can choose between upfront stamp duty of $32,440 or an initial annual property tax of $1195.
A person purchasing a different Sydney house for $1,350,000 with a land value of $810,000 can pay $59,125 in stamp duty - or an initial annual property tax of $2830.
Is the land then locked into the property tax forever?
No. If properties that are subject to the property tax are sold, they will not be locked into the property tax for subsequent owners.
The new owners, if they are first home buyers, can then choose whether to pay the annual land tax or stamp duty.
If they're not buying their first home - the usual stamp duty rules apply.
What if I move out and it becomes an investment?
If you bought the property as a first home buyer, opted for the property tax and then turned it into an investment, the scheme changes.
You will be required to pay $1500 plus 1.1 per cent a year.
The policy is specifically designed to help first home buyers get into the property market.
Am I better off paying stamp duty or a property tax?
That depends.
The median time people hang onto their homes in NSW is ten-and-a-half years.
First home buyers generally keep them for a little longer than that.
Based on that you'd probably be better off paying a smaller annual tax rather than a lump sum.
But, you should always get independent financial advice.
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