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    NSW tax reform: Inside the government’s decision to scrap stamp duty for home buyers

    First home buyers with $54,000 in their pockets but empty nesters worse off: Inside the NSW government’s plan to abolish stamp duty and create an ‘opt in’ property tax – so this is what it means for YOU

    • Stamp duty is tax that buyers must pay when purchasing new home in NSW 
    • Treasurer Dominic Perrottet wants to replace it with a lower property tax 
    • Measure is expected to stimulate the economy by $11billion over four years 
    • First-home buyers could save $54,000 at the time of purchasing property
    • Someone buying ‘forever home’ would be better off keeping stamp duty 

    The government’s radical tax reform plan promises to make homes cheaper for first home buyers but could be more costly for someone looking for their ‘forever home’.

    Under the proposal, which was raised during the state budget announcement on Tuesday, home buyers would have the option to pay stamp duty or a much lower annual ‘property tax’.

    The annual property tax would involve paying a fixed amount plus a rate applied to the property’s unimproved land value. 

    The ambitious plan has been welcomed by most, including the state opposition. 

    But there is no start date for the plan as it must go to public consultation in March. 

    Not everyone would be better off with choosing the property tax. A couple buying their ‘forever home’ for $700,000 would be up for $27,500 more over 20 years. Therefore, would be better off opting for stamp duty over land tax (Stock image pictured)

    First-home buyers would benefit with a grant up to $25,000 instead of existing concessions. They can then choose to pay property tax over stamp duty which, on a $750,000 property, would be $29,000 (stock image pictured)

    First-home buyers would benefit with a grant up to $25,000 instead of existing concessions. They can then choose to pay property tax over stamp duty which, on a $750,000 property, would be $29,000 (stock image pictured)

    HOW THE CHANGES WILL AFFECT YOU:  

    First-home buyer: Could save $54,000 at the time of purchase

    If unimproved land was worth $500,000 they would pay $2,000 a year in property tax

    Empty-nesters: Could face a bigger bill if they choose a property tax

    A $700,000 would be up for $27,500 more over 20 years

    Owner/occupied residential property: $500 + 0.3 per cent of unimproved land value 

    Investment residential property: $1,500 + 1.0 per cent of unimproved land value

    Farmland: $0 + 0.3 per cent of unimproved land value

    Commercial property: $0 + 2.6 per cent of unimproved land value

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    Stamp duty – or transfer duty – is a tax that buyers must pay when they purchase a new home. The amount due depends on the value of the property. For a $750,000 property, the duty would be $29,085. 

    The tax is a major cash cow for the state government, raising an estimated $8.3billion in the 2019-20 financial year – and scrapping it would require financial help from the federal government in the short term. 

    The duty tax can discourage people from moving house, but replacing it with an annual land tax would let people keep more of their money to spend in the economy, the Treasurer said. 

    First-home buyers would benefit with a grant up to $25,000 instead of existing concessions.

    They can then choose to pay property tax over stamp duty which, on a $750,000 property, would be $29,000. 

    The change could save them $54,000 at the time of purchase.

    Buyers with a growing family needing to upgrade would also benefit from the changes depending on how often they choose to buy. 

    However, not everyone would be better off with choosing the property tax. 

    A couple buying their ‘forever home’ for $700,000 would be up for $27,500 more over 20 years. Therefore, would be better off opting for stamp duty over the land tax.

    Buyers of luxury properties will likely be excluded from the property tax, left with no option but to shell out stamp duty in a bid to limit the initial hit to revenue.

    Treasurer Dominic Perrottet said the plan was a ‘realistic pathway’ to achieving the most important state economic reform of the last half-century.

    Buyers of luxury properties will likely be excluded from the property tax, left with no option but to shell out stamp duty in a bid to limit the initial hit to revenue

    Buyers of luxury properties will likely be excluded from the property tax, left with no option but to shell out stamp duty in a bid to limit the initial hit to revenue

    Buyers with a growing family needing to upgrade as well would benefit from the changes depending on how often they choose to buy

    Buyers with a growing family needing to upgrade as well would benefit from the changes depending on how often they choose to buy

    The proposal could also generate $11 billion of economic benefits in the first four years, he said.

    ‘Stamp duty is a relic of a bygone era when you picked one ­career, started a family, bought a home and basically settled in for life,’ he said.

    Chief executive of Infrastructure Partnerships Australia, Adrian Dwyer hailed it as an ‘enduring legacy of positive tax reform’.

    ‘Sensible land tax reform has ­finally been pulled out of the too-hard basket and placed on the table for reasoned public debate,’ he said.

    The treasurer is also consulting on handing out grants of up to $25,000 to help first home buyers pay the tax. 

    Handing down the state budget on Tuesday, Treasurer Dominic Perrottet (pictured with Premier Gladys Berejiklian) said he wanted the current system reformed 'as soon as possible'

    Handing down the state budget on Tuesday, Treasurer Dominic Perrottet (pictured with Premier Gladys Berejiklian) said he wanted the current system reformed ‘as soon as possible’

    Land tax already applies to vacant land, holiday homes, investment properties and commercial properties over $755,000 but could be expanded to primary homes under the proposal (Stock image pictured)

    Land tax already applies to vacant land, holiday homes, investment properties and commercial properties over $755,000 but could be expanded to primary homes under the proposal (Stock image pictured)

    First home buyers are currently exempt from stamp duty if their home is worth less than $650,000 and receive concessional rates up to $800,000.  

    Land tax already applies to vacant land, holiday homes, investment properties and commercial properties over $755,000 but could be expanded to primary homes under the proposal.  

    Under current rules, the owner must pay 1.6 per cent of the value of their land above $755,000 to the government each year. For land worth $1,000,000 this figure amounts to $4,020. 

    What are stamp duty and land tax? 

    Stamp duty – or transfer duty – is a tax that buyers must pay when they purchase a new home. The amount due depends on the value of the property. For a $750,000 property, the duty is $29,085. 

    Land tax is an ongoing annual fee that already applies to vacant land, holiday homes, investment properties and commercial properties.

    Under current rules, the owner must pay 1.6 per cent of the value of their land above $755,000 to the government each year. For land worth $1,000,000 this figure amounts to $4,020. 

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