The reform to Stamp Duty
The NSW Government has introduced a radical proposal changing the current tax system for home owners purchasing properties. It effectively gives purchasers an option to either pay stamp duty or alternatively pay a smaller annual property tax.
The proposal outlined in the 2020-21 State Budget aims to boost home ownership and increase household mobility estimating 300,000 to enter the property market as result of the changes.
What’s the problem with Stamp Duty?
Its obvious to anyone saving to purchase a home that stamp duty has a direct impact on their decision and often delays the purchase. Catching the governments eye is that these delays are stalling economic growth. Under the current scheme it is only natural that purchasers defer buying smaller property with a view purchase a more expensive home with the intent to avoid paying stamp duty twice.
The governments data bears this out. Since the early 1990’s home ownership has dropped from 70% down to 64% with the stamp duty burden being a key factor in the decline.
How are first home buyers affected?
The proposed changes are directed toward first home buyers. They look to address a fundamental problem that first home buyers are entering the market as they get older. The first home buyers age has increased from 33 to 35 since 1995 which is a direct result of the increased cost pressures to enter the housing market.
Currently, stamp duty is waived for first home buyers looking to snap up properties valued up to $650,000 or new homes up to $800,000. Very generous concession one would agree given the median Sydney house price to be around $1.4 million.
By replacing stamp duty with a annual property tax, the intention is that first home buyers would experience fewer upfront costs when purchasing their first property with less time spent saving for a deposit.
What are the proposed changes?
In a nutshell, a first home buyer or an investor can choose to either pay stamp duty or elect to pay a smaller annual tax for as long as they own the property. The tax will be a fixed charge to be calculated on the current value of the property.
The proposed changes apply to residential and commercial property as well as primary production land. Changes also abound to replace the existing home buyer concession with a new grant of up to $25,000.00.
It is predicted that two thirds of first home buyers will elect the property tax. After saving and scrounging all these years to enter one of the most expensive housing markets in the world, who can blame them.
Are you a first home buyer or investor looking to buy?
Strafurd York can assist with all related enquiries. Feel free to contact our team on 1300 158 066 or by writing to us at property@strafurd.com.au
