Over recent years there has been a major push from the public on the NSW Government to reform the legislation and regulations surrounding Stamp Duty and Land Tax in NSW. This has been a long-debated topic of conversation with most people who intend to purchase property in NSW; and as the property market continues to boom and the prices of properties in NSW continue to rise to record heights the NSW Government has now taken steps to finally address this.
The NSW Government has released a consultation paper to inform the public on proposed reforms and request feedback in respect of the current Duty and Taxes in place and whether these changes will impact the people of NSW.
The completion of a purchase transaction cannot proceed without Stamp Duty being paid to Revenue NSW. Stamp Duty is paid on a progressive scale comparable to the consideration paid for the purchase, as set out in the below table:
|Property value||Transfer duty rate|
|$0 to $14,000||$1.25 for every $100 (the minimum is $10)|
|$14,000 to $31,000||$175 plus $1.50 for every $100 over $14,000|
|$31,000 to $83,000||$430 plus $1.75 for every $100 over $31,000|
|$83,000 to $310,000||$1,340 plus $3.50 for every $100 over $83,000|
|$310,000 to $1,033,000||$9,285 plus $4.50 for every $100 over $310,000|
|Over $1,033,000||$41,820 plus $5.50 for every $100 over $1,033,000|
Premium Stamp Duty is payable on consideration paid for the purchase as follows:
|Period||Property value||Premium rate|
|From 1 July 2020||Over $3,101,000||$155,560 plus $7.00 for every $100
Land Tax is an annual payment made to Revenue NSW on the ‘unimproved’ value of the land that is owned in NSW. Exemptions include, but are not limited to, the ‘principal place of residence’ exemption which excludes the payment of Land Tax on owner occupied properties.
Land tax is charged at a rate of 1.6 per cent on the aggregate land value of the properties that are owned by the individual that exceed the threshold each year. As can be seen from the below table, the threshold continues to rise substantially each year:
|Tax Year||General threshold||Premium threshold|
Although the NSW Government intend to introduce several drastic reforms, the leading reforms for property transactions are:
- The implementation of a property tax, similarly to council rates, that is paid yearly by the homeowner. This is applied to each individual property unlike the current land tax position.
- At the time of purchase, the buyer can decide whether they want 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.
- 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.
In making the decision as to whether to elect for stamp duty or the yearly land tax, the buyer will need to weigh up whether they will move homes frequently (whereby the property tax would be advantageous) or whether they are buying their forever home (a one off payment of stamp duty will be more beneficial).
The Consultation Period to provide feedback has now closed and the NSW Government is now in the review process and will decide how and if the changes will be implemented. Given the reluctance of change in the past, it will fascinating to see how the NSW Government approach these changes, if any, and the impact it will have on the property market and the economy in general.
If you have any questions about the proposed changes to stamp duty or land tax, please do not hesitate to contact a member of Coleman Greig’s Commercial Property Team, who would be more than happy to assist you today.