Last Updated: 19th November 2020
With the budget papers being released this week, NSW Treasurer Dominic Perrottet has proposed a dramatic plan to give NSW home buyers the option to opt out of paying stamp duty and pay an annual land tax instead.
Here we take a look at what we know so far about the proposed changes and what it could mean for those looking to buy.
NSW Treasurer Dominic Perrottet has proposed a plan to overhaul the way Australians have been taxed on property.
While the plans are yet to be finalised, the NSW Treasurer is proposing that home buyers, instead of paying a one-off upfront stamp duty payment on the purchase of a property, could instead opt to pay an annual land tax which would be based on the value of their land1.
Having greater flexibility and choice would be welcomed news for prospective buyers, however it would make getting expert home loan guidance more important than ever.
Let’s take a look at the facts about stamp duty as it stands today.
What is stamp duty?
Stamp duty is a tax that is associated with some of the legal paperwork and documents that are required to be filed after a property is sold.
The government requires that the tax be collected to cover the administrative fees of transferring the title. You won't be able to take ownership of the property until you've paid the stamp duty, so it is important to factor the cost of the tax into your budget if you are looking to buy.
How much would I expect to pay in stamp duty?
The exact amount of stamp duty homebuyers would pay depends on the location of the property. Each state has its own stamp duty tax, and you can use the Mortgage Choice Stamp Duty Calculator to discover your stamp duty, transfer fee and mortgage registration fee for your particular property, whatever state you're buying in.
For first time buyers building their own home, the NSW state government announced earlier in the year it will be temporarily axing stamp duty on newly built homes under $800,000 for first home buyers.
What would these new potential changes mean for home buyers?
In NSW, the average stamp duty is $26,000, however the more expensive the property the more stamp duty you pay. As housing prices in major metropolitan areas have surged, stamp duty has also increased. On median house prices in Sydney for example buyers could expect to pay in excess of $40,000 in stamp duty2.
When it comes to the option of an annual land tax, the longer a homeowner were to stay in that property, the more land tax they would pay.
Either way, the high costs of stamp duty make a call for change important. Stamp duty costs can make it difficult for new buyers to enter the real estate market. Hopefully, any new stamp duty or other tax structures introduced would be beneficial for both the government and new home buyers.