Will The Proposed NSW Stamp Duty Impact You?
Stamp duty is the tax governments place on legal documents, usually in the transfer of assets or property. Governments impose stamp duties, also known as stamp taxes, on documents that are needed to legally record certain types of transactions.It is one of the most unpopular taxes in Australia, which could soon be scrapped in NSW if government plans get the green light. But what will it be replaced by? And would first home buyers in Sydney be better or worse off under the proposed new model?
An Outdated Tax
Currently, stamp duty is one of the biggest upfront costs of buying property in Australia. The stamp duty calculator in NSW calculates that amount you pay based on the property’s market value under a sliding scale. Its rates vary from state to state, and whether you’re an owner-occupier, first home buyer in Sydney or an investor.
In NSW, owner-occupiers face an average bill of $34,000 which is payable within three months of settlement. First-home buyers in Sydney are exempt or receive concessions on the tax if they buy an established property costing less than $800,000 or a newly built home valued at under $1 million.
Critics, including the NSW treasurer, have slammed the tax as “outdated” and a “relic from a bygone era”. That’s because the rate brackets of the stamp duty calculator in NSW, haven’t been updated since 1985 when the median house price in Sydney was around $73,000.
It’s now just under $1 million.
The New Replacement Tax
The NSW government wants to replace stamp duty with, what the Treasurer dubbed, the “Netflix of property tax.” Under their proposals, you will be given a choice between paying stamp duty or a smaller, annual property tax based on land value. First home buyers in Sydney would get a grant of up to $25,000 instead of an exemption. There will be no double taxation. So, you won’t have to pay the annual tax if you’re an existing homeowner that’s not planning on moving.
Pros and Cons of the Annual Tax
The government is consulting on their proposal with the details examined with utmost consideration. However, if this gets the go-ahead, the new model comes with both advantages and disadvantages.
On the plus side, without the financial burden of stamp duty, more first-home buyers could get on the property ladder with the help of mortgage brokers in Sydney. Older people will be more likely to downsize.
However, more buying and selling throughout the market could cause a short-term uplift in property prices. As a result, you may end up paying more for a new home. That could leave you worse off under the annual tax, as you’ll likely pay more in the long run. Before getting into the buying process, consult with your mortgage broker in Sydney.
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