The State Government recommended making stamp duty optional for property purchases as part of the New South Wales recent Budget. This is a huge change which will make the dream of owning a home a reality for many Australians. Many economists have also lauded the move and labeled it as ‘good news’ for homebuyers. How will this affect you? Here’s everything you need to know about the proposed new reform.
Stamp Duty: What Is It?
Whenever you buy a property, the state government collects tax. This is known as stamp duty.. Stamp duty collection is a big revenue driver for the state government . In the last two financial years alone, the state collected NSW $7.4 billion and $6.9 billion respectively from stamp duty.
The amount payable on stamp duty depends on the value of the purchase. The more expensive it is, the more you’ll have to shell out. It is costly, especially in NSW
Whether it’s an elderly person living in a huge home wishing to downgrade or someone wanting to move for employment, stamp duty is one of the biggest factors that prevent people from doing so. These new reforms can be revolutionary for prospective homeowners.
A Huge Win For First Home Buyers
According to Andy Kerr, executive of NAB homeownership, any update to the current system or move to relax land purchasing is a huge win for first time home buyers. According to him, this new reform is ‘critical’ for first time home buyers who are often held back by the cost of stamp duty. Mr. Kerr also considers stamp duty a huge ‘hurdle’ for first time home buyers. According to Ms. Conisbee, the new reforms offers a better incentive for first time home purchasers.
What is the New Proposal?
According to the new proposal, an annual land tax on new property purchases will replace the stamp duty. This model is already in place in Canberra. Ms. Conisbee mentioned that this new system gradually replaced the old one over the years. In Australia’s capital city in the ACT, stamp duty was eliminated for first home buyers from July 2019 onwards as long as their household income was less than $160,000.
This new reform isn’t just a boom for first time home buyers but will also benefit the state government and help stimulate the economy. Ms. Conisbee says that the new move will remove a high cost and encourage more people to buy and sell.
You Have A Choice
As a buyer, you will still have a choice. This new reform isn’t going to replace the stamp duty forcefully. As a homebuyer, you can choose to pay an annual property tax or a one-off stamp duty bill, which can go up to $100,000 in Sydney. If you want to opt for annual property tax, you’ll have to pay a yearly fee for the entire time you own the property. Additionally, you don’t have to keep a huge amount of money for stamp duty, instead you can use this towards your home deposit and save on lenders mortgage insurance if you’re already borrowing more then 80% of the value of the property.
A Much-Needed Change
Many experts believe that stamp duty reform has been long overdue and much needed. The new reforms will certainly lay off some stress for prospective buyers. According to Mr. Mckibbin, CEO of Real Estate Institute of NSW (REINSW), stamp duty disturbs market activity and restrict people from moving.
This is particularly true for downsizers who would have freed up housing stock. Additionally, it reduces the extra costs that you would otherwise have witnessed as a home buyer. McKibbin mentions that though there’s no such thing as a good tax, some are better than others. With this new reform, stamp duty will be phased out in NSW.
According to treasurer Dominic Perrottet, the existing stamp duty system was centuries old and needed a change to provide NSW residents with a modern tax system. He denounced the current stamp duty system during his budget speech and labeled it as a “relic from a bygone era.” To turn many Australians’ dreams into reality, Mr. Perrottet believes that the new changes are the most important economic reform.
In his views, the existing stamp duty system is a massive barrier to homeownership for many Australians. The new overhaul will make it possible for many people to purchase the property. More people will be able to buy their homes and will also be able to choose the right property for their loved ones. He believes that the overhaul will save tens of thousands of dollars for Australian homebuyers and accelerate economic growth.
According to Mr. Perrottet, the new reform is a critical stimulus measure. He expects it to contribute as much as a whopping 11 million to the economy over the next four years. After addressing community feedback, this new reform will take place from the second half of 2021.
Conclusion
Overall, this new reform is a massive relief for new home buyers. Most experts hail this move and will make it easier for thousands of people to buy a new home. You must seek advice from professionals if you’re planning on purchasing a new property.
