In this week’s state budget, the treasurer announced that the Government is looking at a possible reform of the system under which we pay transfer (or “stamp”) duty when buying real property in New South Wales. The current system was introduced in the mid-1800s and the reason for the proposed change is that it is not suited to the needs of our current society. The proposed new system would give property buyers an option to pay either an upfront transfer duty or a smaller annual property tax. The way the property tax would be calculated has not yet been announced.
Currently, the First Home Buyer Assistance Scheme provides transfer duty exemptions to those purchasing their first home, provided the property’s value is less than $650,000 for existing homes and $800,000 for new homes. Concessions are available for new homes valued up to $1,000,000 and existing homes valued up to $800,000. The reforms would replace this scheme with a $25,000 grant for first home buyers. It is not clear whether this is in addition to the First Home Owner Grant (New Homes) Scheme. If the new scheme is intended to be the only benefit, new home buyers could be either better or worse off depending on the home they intend to purchase.
For subsequent home buyers, the proposed scheme would allow the option of significantly reducing the upfront cost of purchasing a home. This may better accommodate anyone wishing to upgrade or downsize their current home or needing to relocate.
Another aspect of the proposal is that any transfer duty or property tax would be at a lower rate for residential owners than for residential investors. The intention behind this is to give residential owners an advantage in their competition with residential investors. An important take away is that if you have already acquired your home then you would not be subject to property tax. There would be no double taxation.
Part of the Government’s process of developing the new system will include consultation with the public regarding their preferences. You can contribute to the discussion HERE until 15 March 2021.
