Poll - Would you rather opt to pay Stamp Duty or Property / land Tax for PPOR

Discussion in 'Property Market Economics' started by Sigemup, 18th Nov, 2020.

Join Australia's most dynamic and respected property investment community
?

Would you rather opt to pay Stamp Duty or the new proposed Property / land Tax for PPOR

  1. Stamp Duty

    43 vote(s)
    75.4%
  2. Property / land Tax

    14 vote(s)
    24.6%
  1. Sigemup

    Sigemup Well-Known Member

    Joined:
    31st Mar, 2019
    Posts:
    210
    Location:
    NSW
    Hi guys,

    Poll - Would you rather opt to pay Stamp Duty or Property / land Tax for PPOR?

    Please vote.

    Thank you
     
    luckyone likes this.
  2. Trainee

    Trainee Well-Known Member

    Joined:
    24th May, 2017
    Posts:
    10,258
    Location:
    Australia
    There's no simple answer.
    There are a lot of moving parts with a lot of unknowns. The different rates. How long you might hold the property for. Individual tax rates (if you assume property tax is deductible in the year incurred, while stamp duty is still added to the cost base) for IPs. What you expect for growth in unimproved land value and property tax rates. For investors it looks like you lose the land tax threshold if you choose property tax, so it depends on whether you hold more or less than the current land tax thresholds. It may make holding NSW in a trust more attractive? Rules around otp, inheritance?

    Feels like fhbs, in particular, are more likely to choose the property tax for the lower deposit and get 25k in furniture. For PPOR upgraders it's a harder decision.
     
    luckyone likes this.
  3. MB18

    MB18 Well-Known Member

    Joined:
    25th Sep, 2018
    Posts:
    1,374
    Location:
    NT
    Also depends whether you believe the proposed 'option' is merely a transitional arrangement, and in the years ahead you are going to be forced onto the annual land tax anyway.
     
    luckyone likes this.
  4. MyPropertyPro

    MyPropertyPro REBAA Buyer's Agents Sutherland Shire & Surrounds Business Member

    Joined:
    1st Jul, 2015
    Posts:
    1,874
    Location:
    Australia
    I just don't see how any government could abandon a grandfather provision when someone has paid tens of thousands in stamp duty without some sort of offset. It would be a double slug and unpalatable by the vast majority of the electorate who aren't planning to move any time soon, if ever. If it happened there would have to be some sort of offset which I don't think is out of the question. Clearly as they transition to this arrangement they want every property on it.

    - Andrew
     
  5. skater

    skater Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    10,222
    Location:
    Sydney? Gold Coast?
    Impossible to answer. If I was flipping it, then the yearly payment, but if I wanted to stay there for any length of time, the once off fee is best. The kicker is that eventually they will claw land tax out of people's PPOR.
     
    craigc likes this.
  6. albanga

    albanga Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    2,701
    Location:
    Melbourne
    Land tax for me based upon where I’m at in my life right now.

    I’m in a townhouse with a small baby and are planning to move for more space. Stamp duty makes this very difficult! Why?

    Well do I sell and move? What happens if is don’t like the area? Is this only a temporary requirement as eventually we won’t need as much space again.

    Do I rent and rent this out? Do I want to do that though? Stacks of pros and cons and TBH I hate renting.

    With land tax then the issue becomes much much smaller to sell and relocate as desired.
     
    luckyone likes this.
  7. Scott No Mates

    Scott No Mates Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    27,101
    Location:
    Sydney or NSW or Australia
    If I'm paying >$100k SD on purchase I would seriously need to consider all options including the effect on the additional borrowings vs an annual payment.
     
    luckyone likes this.
  8. MB18

    MB18 Well-Known Member

    Joined:
    25th Sep, 2018
    Posts:
    1,374
    Location:
    NT
    I agree. My guess would be something along the lines of phasing out the 'option', and then a long dated introduction to land tax anyway... perhaps 10 years if you are not already on it.

    If nothing else the administrative burden of ultimately running both systems as one progressively dies out will determine that outcome.
     
    MyPropertyPro likes this.
  9. skater

    skater Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    10,222
    Location:
    Sydney? Gold Coast?
    LOL! Just upgraded to our biggest house yet. Retired, just the two of us. Four beds double garage, lots of living space. We're not the only ones to buy bigger homes after kids have moved either.
     
    albanga likes this.
  10. albanga

    albanga Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    2,701
    Location:
    Melbourne
    Don’t tell me that!
     
  11. Gockie

    Gockie Life is good ☺️ Premium Member

    Joined:
    18th Jun, 2015
    Posts:
    14,741
    Location:
    Sydney
    Yep, no kids here but we have a big arse home... with an annual land tax people might decide to move. Without, they'll just stay where they are, even though they don't need the bigger homes...
     
    unicorntears likes this.
  12. skater

    skater Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    10,222
    Location:
    Sydney? Gold Coast?
    Moved from a very small 3 bedder with two teenagers, to a small 4 bedder. Kids moved out & now we don't have enough room for everything. We need a guest room, a music room, my office. In fact I'm thinking that we should have bought a 5 bedder.
     
    albanga likes this.
  13. C-mac

    C-mac Well-Known Member

    Joined:
    26th Jun, 2015
    Posts:
    1,348
    Location:
    Sydney
    I have not cast a vote on this yet for the above reasons that others have cited.

    If the poll question was restructured to give a fictitious example using some (yet to be known!) rates and values, I could have a go.

    For instance...
    "PPOR, FHB'er; with intent to reside for 10 year a then sell; buying a $500K purchase price property within which sits a $300K improved land value and Land tax is assumed as 1.5% annual with no inflation adjustment". Only then could one vote in the poll after doing the maths on each.

    Even in my example above, even one variable-change could change the vote! For instance imagine the scenario is the same EXCEPT instead of selling after 10 years, they move out and intend to rent it as an investment for another 10 years. Or another variable change is $500k purchase price but only $150K of land value and $350K of dwelling value. Etc. Etc.

    I guess what this poll is revealing to us is: whenever the new laws come into practice; a buyer must know their exact short, medium, and long term intention for a property; they must know the property's land-only value up front before purchase; they must know what the land tax rate actually is (and find confirmation that it'll only increase annually with inflation and no other increase-multiplier); before they can do the maths to figure out what choice is right for them.

    Yes folks, it's complicated. But what picture it paints is: as always, buyers need to DYOR like crazy, armed with facts and a calculator, before making this decision!
     
  14. DueDiligence

    DueDiligence Well-Known Member

    Joined:
    27th Jan, 2020
    Posts:
    439
    Location:
    Sydney, Australia
    Tax is the thin end of the wedge... always goes up.
     
  15. unicorntears

    unicorntears Well-Known Member

    Joined:
    4th Nov, 2020
    Posts:
    271
    Location:
    Sydney
    I currently own a house that's not ideal for me anymore. However, I still like the neighbourhood. I'd like to swap to a different house of the same value in the same neighbourhood, but would have to pay $50k in agent fees, $100k in CGT (IP converted to PPOR), and then $80k stamp duty on the next house. I'm resentfully staying put (and probably denying someone else the opportunity to purchase a home ideal for them).
     
    luckyone likes this.
  16. unicorntears

    unicorntears Well-Known Member

    Joined:
    4th Nov, 2020
    Posts:
    271
    Location:
    Sydney
    I'm also trying and failing to sell a CBD apartment (awful timing but was planned pre-COVID). The yearly property tax on this would be 1/40th of the stamp duty. I'll probably take it off the market and wait this out now. I expect demand will bottom out until then.
     
  17. Beano

    Beano Well-Known Member

    Joined:
    7th Apr, 2016
    Posts:
    3,346
    Location:
    Brisbane
    If you look at NZ situation when stamp duty was reduced to 0% there was no compensation for those that outlaid thousands of dollars.
    I suspect there will be no offset
     
  18. Beano

    Beano Well-Known Member

    Joined:
    7th Apr, 2016
    Posts:
    3,346
    Location:
    Brisbane
    Not necessarily.
    Swap your house and pay only the house relocator o_O
     
  19. unicorntears

    unicorntears Well-Known Member

    Joined:
    4th Nov, 2020
    Posts:
    271
    Location:
    Sydney
    Screen Shot 2020-11-24 at 7.15.39 PM.png
    What could this mean for you? | NSW Treasury
     
  20. unicorntears

    unicorntears Well-Known Member

    Joined:
    4th Nov, 2020
    Posts:
    271
    Location:
    Sydney
    You mean like when retirees "do" their gap years in Europe? Not actually a bad idea...