With homeownership comes stamp duty and it can sometimes prove to be a huge financial barrier to making your dream a reality.

As you probably know, when you buy a property or someone transfers ownership of a property to you in NSW, you generally must pay transfer duty (stamp duty).

Transfer duty (once known as stamp duty) – must be paid in NSW when buying:

Property, including your home or holiday home, an investment property, vacant land or a farming property, commercial or industrial properties, or a business, which includes land.

Transfer duty is also payable when you acquire land, or an interest in land, without buying it.           For example: a declaration of trust, a gift, or a transaction effecting a change in the beneficial ownership of a property.

You may be eligible for a concession or exemption from transfer duty in certain circumstances, such as:  when you are a beneficiary of a deceased estate, or the transfer is between a married couple or de facto couple.

Transfer duty must be paid within three months of signing a contract for sale or transfer, except in the case of off-the-plan purchases.

If you buy off-the-plan and you intend to live in the property, you may be able to defer your transfer duty liability for up to 12 months.

Proposed reforms on the horizon for NSW Stamp Duty

It would be wonderful if the notorious tax was being completely abolished, however let’s rejoice in the NSW government’s proposed reforms to give home buyers the option to pay stamp duty as a smaller, annual property tax rather than one upfront lump sum. Making it easier for people to enter the property market by reducing up-front costs at the time of purchase.

While some home buyers may still prefer to pay the one-off tax, the proposed reform will provide the option to pay a smaller amount of money, over a longer period of time, thereby removing some of the burdens of upfront costs.

Proposed Reforms 

  1. The implementation of a property tax, similar to council rates, that is paid yearly by the homeowner. This is applied to each individual property unlike the current land tax position.
  2. At the time of purchase, the buyer can opt to pay the property tax attached to the land or stamp duty. Once the stamp duty is paid on a property – the buyer will not be liable for the annual property tax. Once a property is ‘opted-in’ for the property tax, it will be liable for the property tax for all future buyers of the property.
  3. First Home Buyer – the existing stamp duty concessions to be scrapped and replaced with a $25,000 grant, for purchases up to $1,000,000 or $650,000 for vacant land. This will not prevent access to the $10,000 First Homeowner Grant available for purchases under $600,000.00.

Obviously, buyers will need to weigh up what is right for them. If they move homes frequently (the property tax may be more advantageous) or if they are buying their forever home (a one-off payment of stamp duty may be more beneficial).

Stimulating the market

The proposal is aimed at stimulating the NSW property market by allowing people the opportunity to move without the lump sum cost of stamp duty. As well as normal buyers, those thinking of renovating may find it more cost effective to move, and renters may also find it is more financially attainable to purchase a home. 

Will this impact house prices?

More buyers, with more funds will be able to enter the property market under the proposed changes. This may increase demand which would could put upward pressure on house prices across the state. However, in the medium to long term, the reform could bring a levelling out of house prices, with more people incentivised to move without the expensive up-front lump cost of stamp duty.

How much would the property tax be?

An owner-occupier would pay $1,617 annually for a property with the estimated 2021 median NSW residential land value of $405,600. Some properties would pay more than the median, and some would pay less, depending on land values and property use.

When will the proposed changes come into effect?

The NSW Government is working towards a final model for consideration in the second half of the year. In the meantime, don’t hold off on your property buying and selling decisions.

FOR THOSE NOT BUYING A PROPERTY, THERE WOULD BE NO CHANGE.

There would be no double taxation. Those who have already paid stamp duty on their property would not have to pay the property tax.

Learn more about the property tax proposal here: www.nsw.gov.au/property-tax-proposal

Current Stamp Duty Calculators

https://stampduty.calculatorsaustralia.com.au/

https://www.revenue.nsw.gov.au/taxes-duties-levies-royalties/transfer-duty

https://www.sro.vic.gov.au/calculators

https://www.wa.gov.au/service/financial-management/taxation-and-duty/calculate-your-transfer-duty

Acknowledgements: NSW gov, VIC gov, WA gov, stampduty calculators Australia, Stone, Alex Smith- Coleman Greig