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Will stamp duty be stamped out? Stamp duty reforms on the horizon

stamp duty

NSW and Victoria have recently unveiled some big changes to the inefficient tax, and there’s hope it’ll inspire other states to review their own stamp duty arrangements.

 

What is stamp duty?

If you haven’t purchased property, you may be unfamiliar with stamp duty. It’s essentially a state/territory government tax you pay when you purchase real estate.

How much it costs depends on what state you’re buying in, the value of the property you’re buying, and whether you’re eligible for any first home buyer concessions.

It’s considered to be an inefficient tax because it requires a large upfront sum (usually tens of thousands of dollars) and can act as a disincentive to buy and sell property.

Especially if you’re a young family wanting to upgrade from their first home or a downsize hoping to move into a smaller place.

 

Why does stamp duty exist?

Reportedly, stamp duty raises about $21 billion a year, including $7.5 billion for NSW and $6 billion for Victoria.

This explains why state governments have been slow to review the current system – because stamp duty is their biggest source of revenue.

However, with the economy in need of a boost due to COVID-19, the NSW and VIC state governments have made some big stamp duty announcements in their 2020/21 budgets.

NSW has flagged a complete overhaul of the system with a shift towards a property tax, while Victoria has announced short term discounts.

“Reform of the inefficient stamp duty system could create and support thousands of jobs to boost the economy and kick-start our recovery for a prosperous, post-pandemic NSW,” explained NSW Treasurer Dominic Perrottet during the announcement.

But what about the other parts of Australia?

Potential stamp duty reform isn’t just good news for NSW and Victoria.

As two of Australia’s most populated states, a move in these markets may put pressure on other state governments to review their respective stamp duty arrangements too.

Here’s a summary of the announcements made for NSW and Victoria:

New South Wales

The NSW state government will open for public consultation a property tax model that it says will make homeownership more achievable.

NSW Treasury says stamp duty adds $34,000 to the upfront cost of buying the average home, and takes an average 2.5 years to save (compared to one year in 1990).

The consultation will begin with a proposed model that would include giving property purchasers the choice between paying stamp duty upfront or opting to pay an annual property tax.

Victoria

The Victorian government announced it will be waiving 50% of stamp duty on newly-built and off-the-plan homes valued below $1 million.

Existing homes will also be eligible for a 25% stamp duty discount.

The discounts will apply to contracts signed on or after 25 November 2020 and before 1 July 2021.

 

What about elsewhere around the country

In Queensland, the Property Council of Australia says it’s time to review property taxes following NSW’s bold move. However, Queensland Treasurer Cameron Dick, has ruled out announcing a similar scheme ahead of this year’s state budget on December 1.

Whilst other states have not officially announced any changes to stamp duty yet, most offer concessions and exemptions for first home buyers.

Here’s where you can go to find out more about first homeowner concessions and exemptions for NSW, Victoria, Queensland, Western Australia, and Tasmania.

And for our local Canberrans, you can find more about stamp duty concessions here and here.

 

Get in touch

Obviously, the less stamp duty you pay, the more of your money you can put towards a home loan deposit.

So for a hand figuring it all out, please get in touch – we’re happy to help you crunch the numbers.

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