The NSW Government has come up with a bold new plan for how tax is paid on property in the state that could bolster the economy by making it easier to purchase a home.
The proposed changes will give people the option to either pay stamp duty and land tax (where applicable) or pay a new smaller annual property tax.
If it gets the go ahead, homebuyers will essentially have the option of paying one big lump sum when they purchase a property or they can opt to pay a small annual fee as long as they own their home.
Why the need for change?
Stamp duty has come under a lot of scrutiny in recent years, with many arguing that the tax measure is out-dated and a major barrier to breaking into the property market.
According to NSW Treasury, stamp duty adds $34,000 to the upfront cost of buying an average home in NSW, which takes an average of two and half years to save for.
Compare this to back in 1990 when it took an average of one year to save.
The truth is that when stamp duty was introduced in 1865 house prices were much lower and people didn’t move around as much.
A lot has changed since then and with house prices having risen significantly, stamp duty has become a major hurdle for those trying to buy a home.
It’s not just first-home buyers that are affected either. Stamp duty costs can put people off wanting to move homes once they make a purchase because they don’t want to be made to pay the fee again.
Some more details on the proposed changes
First of all, there’s no need to panic if you already own a home because the proposed changes will only apply to those buying property. There will be no double taxation.
Under the changes, owner-occupied homes will be up for less tax than investment properties.
As for first-home buyers, who are currently eligible for stamp duty concessions on properties worth up to $800,000, they will be given a grant of up to $25,000 that can be used towards the tax or home renovations.
How you can have a say
If you’re interested in finding out how the tax reform might affect you then head to www.treasury.nsw.gov.au/property-tax-proposal.
The treasury is also looking for feedback on the changes so you can also head to the above web address if you’re looking to provide any input.