One of the biggest upfront costs for buying a property is stamp duty. Many first home buyers forget to include stamp duty in their initial budget. Meaning they either miss out on buying their dream property or get stuck with a bill that is way higher than expected.
Stamp duty is a government tax on ownership transactions. This can include selling properties, cars and assets which belong to a business. Different charges apply depending on where you live in Australia and can also vary according to the following if:
- It’s an existing, newly constructed property or vacant land
- You are a first home buyer
- Your classified as a foreign purchaser
- Type of property your purchasing is a primary residence or an investment property
Knowing this, what is the stamp duty proposal and what should we expect?
What is the Stamp Duty Proposal?
Proposed by the NSW government, it was created to help people in NSW to purchase their ‘dream home’ and help grow the NSW economy.
To help make this happen, the Government is debating a change. This change allows home buyers the option to either pay stamp duty upfront or pay a smaller annual property tax.
If a property buyer only wanted to own a property for a short amount of time it would be more beneficial to chose to pay Property Tax. As they would save thousands of dollars compared to if they had paid stamp duty on the purchase.
The same goes for if a property was bought for the purpose of living there. It would be more beneficial to pay stamp duty as a one-off payment compared to continual Property tax payments.
Source: https://www.littlerealestate.com.au/news/new-south-wales-propose-stamp-duty-changes
What to expect?
By removing the upfront cost of stamp duty, is will remove tens of thousands of dollars from the home purchase process. It would also make it easier for first home buyers and families looking to upgrade.
This change would save money for NSW residents who are wanting to take a significant financial step of buying a home.
According to the Government the proposed changes could boost the economy at ‘a time that we need it the most’. Approximating to bring $11 billion over four years into the economy. This would in turn provide much needed stimulus in the current downturn NSW, let alone Australia is facing.
A negative outcome of this proposal is once a buyer has opted in, future buyers of that property won’t be able to opt out. They will pay land tax instead for the duration of their ownership.
In summary the proposed change should aid NSW residents when taking the big financial step of buying a home.
For more insights on the property-market, CPD opportunities and more, subscribe free today to The Conveyancing Digest monthly Newsletter.
