If the proposed changes to stamp duty in NSW come to pass, there’s a chance that owning your own home could become a little easier for property buyers across the states.
Here’s a little more info about what the changes are, the pros and cons of the new regime, and how they impact you.
So what do we know about the proposed stamp duty reform?
In a nutshell, the proposed reform of the stamp duty regime in NSW has come about because the NSW Government “wants to help the people of NSW achieve the Australian dream of home ownership, and grow the NSW economy”.
They plan to do this by considering a “once in a generation change”, which would give home buyers the choice to pay either upfront or on an ongoing basis.
If they choose option A, they’ll pay stamp duty upfront as normal (and ongoing land tax where applicable, for investors). If they choose option B, they’ll then pay a new, smaller property tax every year, instead of handing over a huge lump sum initially.
Of course, the devil is in the detail, and right now, there’s a distinct lack of detail on offer.
What is the new ‘land tax’ amount going to be?
That’s the million-dollar question!
And, I do mean that quite literally – with Sydney’s median house price once again nudging above $1m, according to CoreLogic data, there will be home buyers across Sydney and the state keen to know how these stamp duty changes could impact them.
We also know that the property tax would consist of a fixed amount per year, plus a percentage applied to the unimproved land value of an individual property (which is broadly in line with the approach to council rates). In other words, the more your land is worth, the more the stamp duty levy will be each year.
However, what we don’t yet know is the percentages that the new stamp duty rates could be set at – or what the rules and guidelines around them will be. This information is crucial, and could either make this the type of ground-breaking reform that makes property far easier to transact forever more… or not.
For instance, we don’t know:
- How much will the ongoing land tax be? Will you pay a higher amount of tax if you elect to pay it annually, or is it the same as the upfront fee?
- How long land tax payments are scheduled over? Do you pay them every year for five years? 10 years? Longer?
- What happens if you sell your home? If you decide to sell within, say, two years, what happens to your stamp duty obligation – do you have to pay the remainder as a lump sum, or can you continue to pay it off over time?
- Whether homebuyers will be incentivised to pay upfront? Charging a smaller percentage for upfront payments compared to ongoing payments could act as an incentive, which is important as the state government relies on stamp duty income as a huge source of revenue.
Also – what if you already own a property in NSW?
Don’t worry, you’re not going to get double-taxed. This stamp duty reform is being pegged as an ‘either/or’ tax and the NSW government has confirmed: “If you have already paid stamp duty on your existing property, you would not be subject to an annual property tax. There would be no double taxation.”
There’s still quite a lot of information yet to be communicated about these proposed changes, but overall, it’s clear that this could be a huge step towards making home ownership more accessible and affordable. Research from the NSW government found that stamp duty adds around $34,0000 to the upfront cost of buying the average NSW home.
Their modelling also found that this proposal could boost the state’s economy to the tune of $11m over the first four years – so it’s a win-win for the state and property buyers alike.