Stamp duty is one of the biggest costs associated with buying a property – and for many buyers it can also be one of the biggest. barriers to home ownership or real estate investment.
But that could change in New South Wales after the state government announced a proposal that would make stamp duty optional – a plan that has already received mixed reactions from experts in the industry.
How does the stamp duty work in New South Wales?
Stamp duty is a type of tax levied by state and territory governments on purchases of property – including homes, investment property, and vacant land. It is also referred to as a transfer fee in New South Wales and is calculated based on the value of the property.
Revenue NSW determines the amount of tax based on the sale price of the property or the current market value, whichever is greater. The table shows the standard transfer duty calculations as of July 1, 2020. Our stamp duty calculator can also provide an estimate.
According to the Revenue NSW website, the department also charges a premium rate of $ 155,560, plus $ 7 for every $ 100 for residential properties priced above $ 3.1 million. For commercial properties over $ 3 million, the revenue office only examines the portion that is used for residential purposes when applying the premium transfer rights threshold.
For land over two hectares, the premium transfer rate is calculated only on the first two hectares of land, as a proportion of the total plot of land. The remainder of the property will be charged at the normal rate.
Stamp duty must be paid within three months of payment. Buyers of off-plan properties must pay transfer duties within three months of entering into the agreement, but they can also defer payment for up to 12 months.
However, not all buyers are required to pay stamp duty. Revenue NSW also provides exemptions and rebates.
First-time homebuyers can apply for a stamp duty exemption or reduction through the National First-Time Buyer Assistance Program. Under this program, first-time buyers of new homes can claim a tax exemption on properties valued under $ 800,000 and a concessional rate for homes valued at $ 800,000 to $ 1 million. dollars provided you buy the property between August 1, 2020 and July 31, 2021..
Buyers of existing properties priced below $ 650,000 and vacant land valued at less than $ 400,000 may also avoid paying transfer taxes, while those who buy homes between $ 650,000 and $ 800,000 and land between $ 400,000 and $ 500,000 are eligible for a reduction.
First-time buyers can also access the federal government's First Home Owners Grant and HomeBuilder program.
What are the proposed changes to the NSW stamp duty?
As part of the 2020-21 NSW Budget released last week, State Treasurer Dominic Perrottet announced a proposal to make the stamp duty on property purchases optional.
The new arrangement will allow buyers to choose between the current system of paying stamp duty or paying a lower annual tax for as long as they own the property. The new property tax will be a fixed charge, with a rate calculated based on the unimproved property value of the property.
Under the property tax proposal, the government is also prepared to replace existing grants for first-time homebuyers with a new grant of up to $ 25,000.
What the experts say
The state government is hoping the proposed changes will boost the housing market and provide NSW with a long-term income stream.
In his budget speech, Perrottet said the current stamp duty system was "one of the biggest financial barriers to homeownership" in New South Wales, adding that a redesign would benefit future buyers of the state.
"This is a New South Wales reform proposal where more people can own their homes and have more freedom to choose the right property for their family every time. stage of life, ”he said.
Perrottet also said the plan would also be a "key stimulus measure," which could inject billions of dollars into the state's economy in the years to come.
Andy Kerr, director of homeownership at the National Australia Bank (NAB), said the proposal was good for homebuyers.
"For many customers, the stamp duty is a major barrier to buying a home," he told News.com.au. He added that the changes were "most critical for first-time homebuyers who are often slowed down by the cost of the stamp duty."
Meanwhile, Tim McKibbin, managing director of the Real Estate Institute of NSW (REINSW), said that while a stamp duty overhaul was long overdue, there were better options than what the government is offering.
"While there is no such thing as a good tax, some are better than others," he told News.com.au. "When the tax becomes a consideration of a transaction and not a consequence, it is a very bad tax."
“The people of New South Wales have chosen not to pay stamp duty by not purchasing property. On this basis, we welcome the news that stamp duty will eventually be abolished in New South Wales. However, we do not support replacing one property tax with another property tax. "
