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07 Apr 2004 - New Stamp Duty & Land Tax Legislation
Landsburys are a very respected valuation company within the property industry. They have provided me with an excellent summary of the changes announced in yesterdays mini-budget.
Proposed Changes to Stamp Duty and Land Tax in NSW
The NSW State Government has released a mini-budget statement, which includes the following changes to property stamp duty and land tax provisions.
Land Tax
Current System
- Under the current land tax system for New South Wales there is a high threshold at $317,000 and a rate of 1.7% above that.
New System
- For the 2005 tax year the threshold will be abolished and new rates will be introduced to capture a greater proportion of low to medium value investment properties owned from 31 December 2004 onwards.
- Investment properties with a land value of less than $400,000 will have a new rate of 0.4%. Principle places of residence and farms used for primary production will be exempt.
- The marginal rate between $400,000 and $500,000 will be reduced from 1.7% to 0.6%, and above $500,000 will be reduced from 1.7% to 1.4%.
- According to the government these changes are designed to take some heat out of the residential investment property market and to provide most businesses with a significant reduction in their land tax bills.
- The new rates are designed to deliver major benefit to small and medium sized businesses whose business premises have a land value component of between $500,000 and $1 million.
- Businesses in this bracket can expect their land tax to be cut by between 20% and 30% compared with the current tax. Larger businesses can expect the cut to be in the order of 18%.
- The new top marginal rate of 1.4% for NSW compares with 5% in Victoria, 3.3% in Queensland, 2.5% in Western Australia, 3.7% in South Australia and 2.5% in Tasmania.
Stamp Duty
New levy
- The levying of a 2.25% stamp duty will be introduced on the sale of properties except for a person’s principle place of residence and farms.
- This move effectively increases the top rate of stamp duty in NSW to 7.75% per transaction, the highest rate in Australia.
- Properties will be exempt from the duty in cases where the vendor’s sale price does not exceed 12% of their original purchase price, with the exemption phasing out between 12% and 15%.
- Legislation for the new duty will be introduced in May and the new duty will apply as soon as possible but no later than 1 July, 2004.
- Consultations will be held with the property industry during drafting of the legislation to prevent any unintended effects and to maximise administrative efficiency.
- The speech noted that exceptions would need to be put in place for genuine builders to ensure that the duty does not become a value added tax on new homes.
First Home Buyers
- There will be a complete stamp duty exemption for homes costing up to $500,000 with the concession phasing out between $500,000 and $600,000.
- The eligibility for the new first homebuyers stamp duty concession will mirror the requirements of the Commonwealth/State first homeowners grant scheme: it will only be available where none of the joint buyers have previously held equity in a home.
- The new benefits will be available to all eligible first homebuyers who have entered a contract after midnight last Saturday.
Premium Property Tax
- Presently there is a land tax on owner-occupied properties with a land value of over $1.97 million, provided they come within the top 0.2% of properties in the State.
- In the future this arrangement will be replaced with a Premium Property Tax, which will be imposed as a 7% marginal rate stamp duty on all residential properties purchased for more than $3 million.
- The new rate will only apply to that portion of the purchase price exceeding $3 million.