Commercial Stamp duty Reduction for South Australia – July 2017 onwards

As part of rolling changes to help the SA economy, the second stage of business/investment reforms has come through this financial year with commercial stamp duty being reduced to a third of the normal rate of duty. Come the start of the new financial year in 2018 this will become fully abolished – opening an interest property based opportunity in not having to fork out 10’s to 100’s of thousands of dollars in government charges.


How much are we talking?

Let’s look at a $1,000,000 purchase in Adelaide currently. Based on a purchase at this level – this financial year the stamp duty changes results in a reduction of $32,553.33 in government charges. Here’s a little breakdown of the stamp duty comparison between the standard, rate, new discounted rate and the final abolished cost.



Whilst this isn’t only a considerable saving in costs for making an investment or business purchase – it also increases the viability of considering commercial property as an investment as it reduces what has been traditionally the biggest barrier to entering the commercial market – deposit costs. Let’s compare how a residential purchase vs commercial purchase now stacks up under the new reduced environment:



With the reduction the variance between the two is $21,447 and will close to $5,170 post July 2018.

This is a very interest time creating a strong incentive to consider commercial property – with the residential vs commercial deposit gap closing, whilst the ability to borrow in the commercial environment for investors remains strong even in the current APRA regulatory environment – so even those with nil borrowing capacity in the residential space can continue growing in the commercial asset class.

Whats your thoughts on this move - does the prospect of nil stamp duty for commercial purchases increase your likelihood in considering this asset class?

 

This has got to be good for the economy.

 

Yes, it'll be great. I can see investors doing well by getting into that game.

 

Might be more 'flipping' happening too.

 

This is the first thing I thought too - this will allow for viable flipping. Could be especially lucrative if you can buy rundown commercial properties, refit/redesign (potentially split into multiple tenancies), tenant and onsell.

 

Good info. Thanks.
If someone's interested in the source : The Facts - About Tax Reform in South Australia

 

It doesn't help if you still can't lease them. However an incentive's an incentive.

 

Certainly the case for CBD offices the last time I saw the stats - but interestingly last information I was perusing had industrial vacancies etc tightening up. Go figure in this current environment.

 

That's one measure - also Ling term reconossance visits through Industrial areas giving you a snapshot of commercial activity (for lease signs/leased) - how long are they hanging around, are they relocating or expanding or new?

 

Yes, i am in.Do you think our friends the banks will take advantage of this and want a bigger piece of the action?

 

I can't see why they would - policy is generally national and I think they're keen for anything which will encourage further business/commercial lending at this time.

 

well, this has definitely has boosted my confidence into getting into CIP, now they just need to do this in the other states too