NSW to Phase out Stamp Duty

Discussion in 'Property Market Economics' started by skater, 17th Nov, 2020.

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  1. skater

    skater Well-Known Member

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  2. Dean Collins

    Dean Collins Well-Known Member

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    Terrible idea.

    If this is implemented we will sell all our investment properties in Sydney.

    Govt wants their hand in your pocket every year instead of being limited to purchase/sale time.
     
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  3. Robbo80

    Robbo80 Well-Known Member

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    This will be an interesting change.

    Would most new buyers just opt for stamp duty upfront as the latter sounds like a bad long term deal unless you are planning on flipping? but then when the flippers sell, the next set of owners will be forced into paying an annual land tax..

    Will this push towards higher annual taxes result in a California type exodus to states that offer a cheaper cost of living.
     
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  4. Trainee

    Trainee Well-Known Member

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    Seems to suggest it will only apply for transactions going forward. So past purchases are grandfathered in.

    Any information on how much the tax will be?
     
  5. poby

    poby Well-Known Member

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    Wonder what this will do to the property market in NSW? Will people put off purchasing until the changes are implemented, so they can save on stamp duty (far more likely), or will people purchase before the changes so they can pay a lump sum and not pay a land tax every year.

    Looks to be bad news for anyone who has currently listed an apartment for sale, because annual land tax on an apartment should be far less than a lump sum stamp duty (34K on a 850K apartment).
     
  6. inertia

    inertia Well-Known Member

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    Quite possibly - when accounting for the total cost of purchase, stamp duty definitely looms over the top, so when budgeting you do not need to account for so much. May facilitate more transactional sales. I was going to say it may not favour the buy and hold investor, but land tax becomes an annual tax deduction instead of a capitalised cost, so maybe not much different?
     
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  7. skater

    skater Well-Known Member

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    That was my take on it as well, and it should be. We've already paid their exorbitant Stamp Duty.
     
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  8. inertia

    inertia Well-Known Member

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    surely the transition would need to taper? How would they get around that kind of cliff?
     
  9. Trainee

    Trainee Well-Known Member

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    It's (surprisingly) actually long term policy. Big hit to the budget in the short term, but they will borrow to make up the shortfall. Longer term the tax base will be stronger as more and more properties pay land tax.

    Interesting to see what the impact on property is. While there might be a push upwards initially, remember this increases holding costs. Can't see it being anything less than say 1% of land value a year (so maybe 0.5% of market value).
     
  10. poby

    poby Well-Known Member

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    If it's around 0.5% of market value, there may be incentive to buy before the changes. Stamp duty is approximately 3.5-4% for a property around 1M, and the annual tax would overtake the stamp duty in 8-10 years.

    The big question is WHEN will the changes come into place. If it will take 2-3 years (can't imagine a quick change in 6 months for example), then those who were gearing up to buy won't put it off that long..
     
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  11. datto

    datto Well-Known Member

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    But I love the sweetener the govt is offering.....4 x $25 vouchers for food and entertainment. ooh yeah!
     
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  12. Trainee

    Trainee Well-Known Member

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    The consultation period is only until March21, though. That sounds like they will put it in quick. Makes sense to do it early, cover the shortfall with all the other covid related borrowing, and have some time for the land tax revenue to build before the next NSW election.
     
  13. MB18

    MB18 Well-Known Member

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    Back of the envelope approximations run at about 5% for stamp duty in it's current form so all things being equal I would expect a rise in property prices following the implementation. Afterall, your purchasing power just increased about 5% (less affordability considerations of the new tax).

    The current form of stamp duty is the most stupid and idiotic iteration of land tax and a 'subscription' model would be a far more efficient means of achieving the intended results.
    A lengthy and heated thread ran on this earlier in the year I think. I'll see if I can find it and provide a link.

    Of course, this assumes there will be a transition rather than a cliff for those who have previously paid a tradition stamp duty in recent years.
     
  14. MB18

    MB18 Well-Known Member

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  15. Niche

    Niche Well-Known Member

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    Why would this make you sell investment properties? surely if anything you are more likely to hold on to them due to the grandfathered nature of the change
     
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  16. Illusivedreams

    Illusivedreams Well-Known Member

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    Assumption maybe that no grandfathering takes place.
     
  17. bumskins

    bumskins Well-Known Member

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    I would think the ongoing cost works out much worse from a borrowing/serviceability perspective.
     
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  18. ttn

    ttn Well-Known Member

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    Have to see the proposed legislation but can safely assume the beneficiaries would be exempt from the proposed new tax? :D wouldnt want the mrs with a new tax when I'm gone or the other way around ;)
     
  19. ttn

    ttn Well-Known Member

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    i think so too esp no longer any land tax threshold
     
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  20. qak

    qak Well-Known Member

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    Seems like the usual - the rich get richer & the poor fall further behind. On the assumption rich will pay upfront, poor will defer/go annual.
     
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