Announced as part of the NSW budget 2020-21, the state government is to launch a proposal to seek the community’s view on tax reform to reduce the upfront costs for buyers and remove “one of the biggest financial barriers to home ownership”.
Stamp duty for property transfer is around 4% of contract price. Unless you’re a first home buyer and the property is under a certain threshold, this is the additional cost you need to pay.
It adds $34,000 to the upfront cost of buying the average home in NSW.
And you have to cover it from your own saving, as the bank won't lend it to you.
The proposed scheme would allow buyers to choose between:
1. Paying the stamp duty upfront, or
2. Paying an annual property tax instead
So the proposal is not to scrap stamp duty, rather give you a choice to pay it upfront or installment as property tax.
The rate and term of this property tax are yet to determine.
But if you're an investor, you'll be worse off as the rate for investment property will be higher than that of owner-occupied property.
This scheme is expected to implement in the second half of 2021.
It’ll reduce the upfront cost of property and make it easier for people to change homes for whatever reason, such as moving closer to work, up-or-down sizing as family structure changes, or just because of the neighbor’s barking dog (I am a dog lover).
But it can be bad news for renovators. Why? You may simply choose to buy a home with an open kitchen overlooking an established backyard, instead of demolishing the existing kitchen, or even knocking down an internal wall and building a new one.
But there will be one catch, I think.
The bank will consider the property tax an additional financial commitment, like a personal loan. It will reduce your borrowing capacity. You may borrow less if you choose to pay property tax installment, instead of upfront stamp duty.
So there is no such thing as a free lunch. This is always true, especially when dealing with governments.
Stamp duty for property transfer is around 4% of contract price. Unless you’re a first home buyer and the property is under a certain threshold, this is the additional cost you need to pay.
It adds $34,000 to the upfront cost of buying the average home in NSW.
And you have to cover it from your own saving, as the bank won't lend it to you.
The proposed scheme would allow buyers to choose between:
1. Paying the stamp duty upfront, or
2. Paying an annual property tax instead
So the proposal is not to scrap stamp duty, rather give you a choice to pay it upfront or installment as property tax.
The rate and term of this property tax are yet to determine.
But if you're an investor, you'll be worse off as the rate for investment property will be higher than that of owner-occupied property.
This scheme is expected to implement in the second half of 2021.
It’ll reduce the upfront cost of property and make it easier for people to change homes for whatever reason, such as moving closer to work, up-or-down sizing as family structure changes, or just because of the neighbor’s barking dog (I am a dog lover).
But it can be bad news for renovators. Why? You may simply choose to buy a home with an open kitchen overlooking an established backyard, instead of demolishing the existing kitchen, or even knocking down an internal wall and building a new one.
But there will be one catch, I think.
The bank will consider the property tax an additional financial commitment, like a personal loan. It will reduce your borrowing capacity. You may borrow less if you choose to pay property tax installment, instead of upfront stamp duty.
So there is no such thing as a free lunch. This is always true, especially when dealing with governments.