Proposed Changes to Stamp Duty in NSW - Conditsis Lawyers

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Proposed Changes to Stamp Duty in NSW

On 17 November 2020, the NSW Treasurer announced proposed changes to stamp duty including an election by property purchasers to pay a smaller annual tax in lieu of a one-off up-front lump sum based on the value of the property. Stamp duty has become a major barrier to anyone saving for their first home or wanting to upgrade. It is a transaction-based tax paid on the transfer of land by the purchaser and levied on the sale price, which comprises the value of the land and buildings on the property.

Sydney’s current median property price is $1.15M. Currently, stamp duty on a $.15M purchase is a one-off up-front lump sum amount of $48,500. If implemented, the changes would allow a buyer to ‘opt-in’ to a new scheme where buyers would not have to pay anything up-front.

Once a property has been traded under the new scheme it would remain annually taxed for subsequent owners. Existing home-owners will not be affected until they buy another property.

It is proposed that the new annual property tax would consist of a fixed annual rate of $500 plus 0.3% of the unimproved value of the land. This approach is broadly in line with how council rates are calculated. If a buyer opts in for the new annual property tax, then keeping with the same Sydney median property price example, a home-owner would pay about $2,230 annually. That amount would increase with indexation over time.

The fixed annual rate of $500 and 0.3% of the unimproved value of the land would be the rate applicable to residential land that is owner occupied and land that is used primarily for agricultural purposes. A higher rate would apply to residential housing investors and a higher rate again would apply to commercial and industrial property investors.

The new property tax will replace the existing land tax which is levied on properties (other than your principal place of residence) valued above a certain threshold which is currently $734,000.

Under the changes, it is projected that stamp duty will be completely phased out by 2050.

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