Including how you may be able to avoid shelling out $34k come settlement day

Imagine being able to avoid the pain of paying stamp duty when buying your dream home or first investment property.

Sound good? Well that’s exactly what the NSW Government and Treasurer are proposing, claiming their plan will be “the Netflix of property tax”.

So, how is it going to work?

Sadly, stamp duty isn’t disappearing altogether… basically, the idea is to give home buyers two tax options:

A one-off upfront payment when purchasing a home, otherwise known as the beloved stamp duty; or
Pay an annual property tax – a small, annual amount you will have to pay each year for as long as you own the home.

I’m sure you’d agree, stamp duty can be a huge barrier to buying a house. It’s usually around 4% – 5% of the purchase price… meaning that on average, according to the NSW Treasury, stamp duty piles on an extra $34,000 when buying a home in NSW.

Admittedly back in the 1990’s stamp duty wasn’t such a big deal; eager home buyers would typically be able to save for the cost of stamp duty within a year. But in 2020 with housing prices at record highs, it now takes an average of two and a half years to save up for stamp duty.

Former Telstra CEO, David Thorley, has been pushing for stamp duty to be replaced for a while now. He says its causing Australians to live in housing that doesn’t meet their needs.

Saul Eslake, one of Australia’s most respected economic commentators, says the timing couldn’t be better for this policy to be applied due to the economic effects of COVID-19.

This proposed policy could have huge effect on smashed-avo-loving first home buyers hoping to enter the market. What’s more, elderly couples looking to downsize are often put off from stamp duty costs so they will no longer have this barrier.

The real question is. “Will we be better off?”

A proven success…

Australians only have to look across the ditch to see where the inspiration came from. Stamp duty is non-existent in New Zealand.

Brendan Coates, economic and housing expert from the Grattan Institute, says nowhere else in the world has stamp duty like Australia does:

“In New Zealand there is no stamp duty; in the UK stamp duty does exist but it does tend to have lower rates than in Australia; and in the US you do have some stamp duty in some states but you tend to rely on more broad-based property taxes”

So, if nobody else is doing it, why are we? And more importantly, will eliminating compulsory stamp duty help us?

It really depends on your situation, your home ownership status and your plans for the future.

How will changes to NSW stamp duty affect me if I already own my own home?

You won’t be affected. You have already paid your stamp duty and you will NOT have to pay an annual tax.

How will changes to NSW stamp duty affect me if I’m renting?

This will have no impact on your renting situation, but it may take away a small amount of the financial burden if you are looking to buy a home in the future.

How will changes to NSW stamp duty affect me if I want to buy my next house?

When the time comes to purchase your next house, you will get to choose between paying the one-off stamp duty fee or paying the annual property tax.

Consider how long you are expecting to be at your new house. If it’s going to be your forever home, paying the stamp duty may be the better option but if you think you may upgrade, downsize or move areas, the annual property tax may be more cost-effective.

If the stamp duty option suits you more, find out how much you will have to pay on your new home with this Stamp Duty Calculator.

How will changes to NSW stamp duty affect me when buying a residential investment property?

If you’re looking to purchase a residential investment property, you will also have the choice to pay stamp duty or an annual property tax. As an investor, you would have to pay a higher rate of property tax than owners planning to live in the house.

The proposed changes could mean some exciting opportunities for home buyers or investors.

Remember that smart financial decisions today can have long-lasting impacts on the quality of your life. Want to know more about how these changes can help you?

Book an initial appointment with one of our personable, experienced, financial planners. With knowledge in property, superannuation, taxation, and investment options we can help you create a plan to get into your next home or investment property the smart way! We have offices located in Central Coast – Erina (CCFPG), Newcastle – The Junction (NFPG) and Sydney CBD (SWA).

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