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Latest News from PDI: 'Stamp Duty vs. Property Tax in NSW: The Pros and Cons'

We recently announced a sponsorship with Property Development Insights (PDI), who conduct residential and commercial property development courses in Sydney NSW. PDI are delighted to be the inaugural sponsor of the NSW No. 1 Mixed Relay Teams, to support young triathletes in their future quest for international and Olympic medals in this fast and furious race format.

The next PDI Course Series commences on February 23rd, and course series founder Phillip Hoare has offered an exclusive discount on the course just for TNSW members. Click here to read more and get your discount code.

As well, here's the latest Property Development Insights newsletter, which we trust you will find informative.

 

Stamp Duty vs. Property Tax in NSW: The Pros and Cons


The New South Wales Treasurer has outlined a property tax reform in the 2020 Budget announcement. The proposal will allow the choice between the current system of paying stamp duties when buying houses or paying an annual property tax for ownership of houses. The reform, which could pour $11 billion into the NSW economy over 4 years and offer 75,000 new jobs, would commence in the second half of 2021 (NSW Budget, 2020-2021).

Problems with Current Stamp Duty System
The current stamp duty system is recognised as out of date with the present property market. Over the past 20 years, the increase of the housing prices has exceeded the inflation and stamp duty costs and become prohibitive for many purchasers, especially for first home buyers. As the system is also a major disincentive for people moving to a new home, it also lowers the property turnover. From the government perspective, the stamp duty as revenue from the tax fluctuates according to the property market performance.

How Would the Proposed Reform Affect Homebuyers?

  • The property tax would consist of a fixed amount plus a rate applied to the unimproved land value of an individual property.
  • Buyers could choose to pay the stamp duty at the time of purchase or pay the property tax annual. Once a property is subject to the property tax, subsequent owners must pay the property tax.
  • If the current owner already paid the stamp duty, there will not be property tax.
  • Existing stamp duty concessions for first home buyers could be replaced with a grant of up to $25,000.

(NSW Budget, 2020-2021)

 

Pros
Critics believe that stamp duty (a widely despised tax) is inefficient and antiquated, placing a prohibitive cost on moving house. Due to the volatile housing market activity, the NSW coffers would make less on stamp duty than on an average annual property tax, and would provide a more reliable revenue stream.

According to State Treasurer (2020), this reform proposal in NSW enables more people to own their dwelling and have the flexibility to choose a suitable home for their family and re-locate homes more frequently. The proposal could ease the financial barriers for home buyers, and the replacement of the stamp duty with an ongoing annual tax system will stimulate the NSW economy.

Cons
NSW home buyers should not be liable to double taxation with a new property tax in the event that the stamp duty has been paid. However, most property tax proponents think it could be better to abolish stamp duty, where people planning to live in the same home for a long time would prefer the stamp duty while those planning to live for a limited period would incline to the land tax. However, a noticeable short-term government budget shortfall may result from the property tax system.

This proposal may have its complexity of making some houses less popular in the market than others. For instance, if the first buyer chooses to pay the annual land tax instead of paying stamp duty once-off, the future purchasers of this dwelling will be subject to the annual land tax, which would lead to the property less attractive to the buyers who intend to stay for long term.

Although this reform has yet to be gazetted, prudent investors and developers in the residential property will follow these significant proposed changes with great interest.

 

Mitigating risks and maximising profit in property development.
Development opportunities within the dynamic property market cycles and demographic trends are reviewed in depth in the eight-week Property Development Insights course commencing on Tuesday 2nd February 2021. The course is comprehensive and comprises five expert industry presenters, and is very limited in size to ensure optimum interaction and knowledge retention.

 


Date: Tuesday evenings 6:00pm - 8:45pm; 23rd February 2021 to 20th April 2021 (excluding 6th April)

Venue: Excen Corporate Centre, 133 Alexander Street, Crows Nest NSW – 10 min walk from St Leonards train station, 2 hour free parking available nearby.




Disclaimer and Qualifications: This information is general in nature is understood to be from reliable sources and is not to be construed as property investment or property development advice. Expert investigation and independent due diligence should be undertaken by all parties prior to any agreement to purchase, develop or dispose of property


To secure your place now, or have further questions answered,
please call us at any time on (02) 9432 7866 or 0408 997 675.
Email
info@propertydevelopmentinsights.com.au

 


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