Stamp duty – sometimes referred to as transfer duty – is a one-off tax that is imposed by the State government when property is purchased. It is calculated based on the purchase price of a property, on a sliding scale. There are some exemptions to stamp duty, such as where the purchaser is a first home owner, or where the transfer is between husband and wife.

Is Stamp Duty being Abolished?

Not quite.

There is talk of ‘property tax’ being used in lieu of stamp duty. The idea being that a tax will be payable periodically to every home owner in the State, rather than one large sum when a property is purchased.

The proposed reforms involve the tax being fixed at a set amount plus a rate applied to the unimproved land values of an individual property.

Buyers will still have the choice of paying stamp duty, however, once a property is subject to the property tax, subsequent owners must pay that property tax.

The annual property tax may be levied at the following rates – subject to feedback from the public and government officials:

• owner-occupied residential property – $500 + 0.3 per cent of the unimproved land value
• investment, residential property – $1,500 + 1 per cent of the unimproved land value
• primary production land (farmland) – 0.3 per cent of the unimproved land value
• commercial property – 2.6 per cent of the unimproved land value.

What does this mean for Homebuyers?

The ability to be able to pay stamp duty is one of the biggest barriers to home ownership. In most cases the time it takes for the average worker to save up enough money to cover the stamp duty tax is upwards of 2 years according to NSW Treasury. If this proposal is implemented, the removal of Stamp Duty could remove this financial barrier and make the process of buying a home easier for families looking to upgrade.

The biggest issue with this proposed reform is when the property tax will be introduced and what it will entail.

What does this mean for Home Owners, who have already paid Stamp Duty?

The consultation paper suggests that there will be a period of time, calculated from a date prior to the date you purchased your property, that you can opt-in to property tax and be provided a refund of their stamp duty.

This might suggest that if you have already paid stamp duty, you need not “opt-in” to land tax as an option, thereby avoiding any risk of being effectively taxed twice for owning your property.

This is not Advice

This article is not to be taken as advice on the issue, particularly given that the proposal is still in its early stages and subject to change.

What you should do, however, is keep in touch with any changes to stamp duty, as they might affect your plans for future purchases.