What will the new Transfer duty do to balance unequitable market?

21 June 2021

The NSW government has continued it’s plan for property tax reform. In June it has released its progress paper which stipulates the changes proposed to be made in the next financial year.

The plans look to the complete removal of the transfer duty (stamp duty) by 2050. Through the opt-in of buyers of a property to either select the current transfer duty or an ongoing property tax based on the land value of the property. Once changed it could not be changed back.

Improving homeownership

The idea behind this is to increase the declining homeownership rate. By decreasing the barriers of entry for first home owners, and increasing mobility for upsizers and downsizers.

From the progress report, the property tax is likely to be based on the following:

Residential – Owner Occupied- Fixed Fee of $400 + 0.3% of land value
Residential – Investor- Fixed Fee of $1500 + 1.1% of land value

As property prices have soared in the past 30 years. Transfer duty has increased disproportionately more than incomes. This reform should be a welcome change for first home buyers. Investors should be able to claim the property tax against their taxable income as part of continued negative gearing.

If buyers choose not to opt-in for the property tax, they will be at a disadvantage over other buyers who do not have to consider transfer duty as an upfront cos. As a consequence, they could potentially assign more borrowed money towards the asset rather than the transfer duty.

Short Term Impact on Prices

This could potentially increase prices as buyers know that the property tax is correlated with the land value. Which is determined by the valuer-general and not the hubris at an auction as the transfer duty is determined.

It’s easy to speculate possible scenarios where vendors and buyers interact. With this new tax reform but the exact ramifications will not be seen until it has become enacted.

With the aims of the NSW government in mind, we’d expect to see a shift in the balance between owner occupiers and investors in favour of owner occupiers.

Alexander Gibson

Are you waiting for the duty to change to enter the market?

Recent Articles

Widen your understanding with these articles

The Ultimate Guide On How To Add Value To Your Property: Expert Tips

Are you a homeowner looking to boost the value of your property? Look no further! In this comprehensive guide, we will provide you with expert tips and strategies to increase the value of your property. Whether you are planning to sell in the near future or simply want to enhance the market worth of your home, this guide has got you covered.

How Make An Offer On A Property (NSW)

Sick of auctions? How to make an offer on a property that is irresistible to the vendor

Do real estate agents have to disclose deaths

This tells you once and for all what real estate agent have to disclose in regard to death and the sale of property

Complete Guide: The hidden costs to buy a house

A complete guide to the costs of purchasing property

Do real estate agents lie about other ‘offers’?

Real Estate Agents are always under scrutiny in their day-to-day dealings. This is because of the nature of their industry, the stakes are at their highest. We are talking about the biggest asset purchase or sale in both the vendor’s and buyer’s lives. We are talking about risking their own money and debt. There is only one property available and there can be only one winner and everyone else is the loser. There are no prizes for coming in second.

Should I Buy or Sell First?

Should I Buy or Sell? The answer lies with you and your circumstances

What is a buyers agent

A buyers agent or buyers’ advocate is a licensed real estate agent who is procured by a prospective property purchaser to facilitate the acquisition of a property based on achieving the specific goals of the buyer. The buyers’ agent is tasked with sourcing, evaluating, appraising, negotiating, and securing property on behalf of their client.