Stamp duty abolished for some property purchases
Apr 6th 2004, 7:20 am
#3
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Posts: 11,149
He said those owning a second or investment property could afford to pay a 2.25 per cent stamp duty on selling.
The duty would not apply to the sale of a person's principal place of residence and would not apply to the sale of farms, he said.
Legislation for the new duty would be introduced in May, with the levy to apply as soon as possible but no later than July 1, Mr Egan said
As a counterweight to the 2.25 per cent stamp duty on the sale of an investment or second property, stamp duty will be abolished for almost all first home buyers.
"There will be a complete exemption for homes costing up to $500,000, with the concession phasing out between $500,000 and $600,000," Mr Egan said.
The treasurer also announced a major overhaul of the land tax system, with the land tax threshold of $317,000 being abolished.
"From July 1, the threshold will be abolished and fairer and lower rates will be introduced," Mr Egan told parliament.
The duty would not apply to the sale of a person's principal place of residence and would not apply to the sale of farms, he said.
Legislation for the new duty would be introduced in May, with the levy to apply as soon as possible but no later than July 1, Mr Egan said
As a counterweight to the 2.25 per cent stamp duty on the sale of an investment or second property, stamp duty will be abolished for almost all first home buyers.
"There will be a complete exemption for homes costing up to $500,000, with the concession phasing out between $500,000 and $600,000," Mr Egan said.
The treasurer also announced a major overhaul of the land tax system, with the land tax threshold of $317,000 being abolished.
"From July 1, the threshold will be abolished and fairer and lower rates will be introduced," Mr Egan told parliament.
Apr 6th 2004, 10:23 am
#4
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Originally posted by bondipom
He said those owning a second or investment property could afford to pay a 2.25 per cent stamp duty on selling.
The duty would not apply to the sale of a person's principal place of residence and would not apply to the sale of farms, he said.
Legislation for the new duty would be introduced in May, with the levy to apply as soon as possible but no later than July 1, Mr Egan said
As a counterweight to the 2.25 per cent stamp duty on the sale of an investment or second property, stamp duty will be abolished for almost all first home buyers.
"There will be a complete exemption for homes costing up to $500,000, with the concession phasing out between $500,000 and $600,000," Mr Egan said.
The treasurer also announced a major overhaul of the land tax system, with the land tax threshold of $317,000 being abolished.
"From July 1, the threshold will be abolished and fairer and lower rates will be introduced," Mr Egan told parliament.
He said those owning a second or investment property could afford to pay a 2.25 per cent stamp duty on selling.
The duty would not apply to the sale of a person's principal place of residence and would not apply to the sale of farms, he said.
Legislation for the new duty would be introduced in May, with the levy to apply as soon as possible but no later than July 1, Mr Egan said
As a counterweight to the 2.25 per cent stamp duty on the sale of an investment or second property, stamp duty will be abolished for almost all first home buyers.
"There will be a complete exemption for homes costing up to $500,000, with the concession phasing out between $500,000 and $600,000," Mr Egan said.
The treasurer also announced a major overhaul of the land tax system, with the land tax threshold of $317,000 being abolished.
"From July 1, the threshold will be abolished and fairer and lower rates will be introduced," Mr Egan told parliament.
So what do you think this is going to do to the property market ?? Is it the govt cynically thinking - hmm investment property market has topped, some people will be selling soon, lets get our cut !!
Good for 1st time buyers though !
Apr 6th 2004, 10:33 am
#5
Joined: Aug 2003
Posts: 11,149
The NSW government currently has a $300m defecit. First time buyers are pretty much out of the market so the drop in revenue will probably be minimal. Now that the main movers in the market are investors the NSW government is hoping to reap the money off the supposedly less politically sensitive type of homeowner. In theory the 300million deficit will be turned into a surplus.
Stamp revenue duty is maintained by a moving market. If investment housing sales drop then government revenue will drop.
Stamp revenue duty is maintained by a moving market. If investment housing sales drop then government revenue will drop.
Apr 6th 2004, 11:20 am
#6
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Joined: Jul 2003
Location: Elwood, VIC
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Do these policies tend to spread? Just wondered what the odds of this being taken up by Victoria are.
Since property purchases are all about affordability, and we include in that calculation the tax costs, all I would expect this to make the vendor more money.
e.g. I have $300000. Tax is $50000. I can afford a house at $250000. After this policy the $250000 house would simply become more expensive putting more money into the vendors pocket not mine as the buyer.
Since property purchases are all about affordability, and we include in that calculation the tax costs, all I would expect this to make the vendor more money.
e.g. I have $300000. Tax is $50000. I can afford a house at $250000. After this policy the $250000 house would simply become more expensive putting more money into the vendors pocket not mine as the buyer.
Apr 6th 2004, 11:32 am
#7
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Originally posted by cutgrass
Do these policies tend to spread? Just wondered what the odds of this being taken up by Victoria are.
Since property purchases are all about affordability, and we include in that calculation the tax costs, all I would expect this to make the vendor more money.
e.g. I have $300000. Tax is $50000. I can afford a house at $250000. After this policy the $250000 house would simply become more expensive putting more money into the vendors pocket not mine as the buyer.
Do these policies tend to spread? Just wondered what the odds of this being taken up by Victoria are.
Since property purchases are all about affordability, and we include in that calculation the tax costs, all I would expect this to make the vendor more money.
e.g. I have $300000. Tax is $50000. I can afford a house at $250000. After this policy the $250000 house would simply become more expensive putting more money into the vendors pocket not mine as the buyer.
Sorry mate, can't make head nor tail of your post !
Are you saying that the only effect will be a rise in property prices ?
Apr 6th 2004, 11:33 am
#8
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Originally posted by cutgrass
Do these policies tend to spread? Just wondered what the odds of this being taken up by Victoria are.
Since property purchases are all about affordability, and we include in that calculation the tax costs, all I would expect this to make the vendor more money.
e.g. I have $300000. Tax is $50000. I can afford a house at $250000. After this policy the $250000 house would simply become more expensive putting more money into the vendors pocket not mine as the buyer.
Do these policies tend to spread? Just wondered what the odds of this being taken up by Victoria are.
Since property purchases are all about affordability, and we include in that calculation the tax costs, all I would expect this to make the vendor more money.
e.g. I have $300000. Tax is $50000. I can afford a house at $250000. After this policy the $250000 house would simply become more expensive putting more money into the vendors pocket not mine as the buyer.
Apr 6th 2004, 11:36 am
#9
Member who went to Aus
Joined: Jul 2003
Location: Elwood, VIC
Posts: 74
Sorry, what I'm saying is that reducing tax doesn't automaticaly make a property cheaper.
If VAT were abolished in the UK would goods become cheaper or would retailers simply make more profit?
Similar thing for property.
If I can get 500,000 out of a mortgage lender for a house I deduct the tax off that and so work out how much house I can afford. Lets say tax costs me 50,000 that means I'm shopping for a house worth 450,000.
If tax gets abolished can I suddenly afford a better house, OR does that 450,000 house just become a 500,000 house because everyone with my income is looking for the same sort of house. Market forces and all that.
Does that explain it better?
If VAT were abolished in the UK would goods become cheaper or would retailers simply make more profit?
Similar thing for property.
If I can get 500,000 out of a mortgage lender for a house I deduct the tax off that and so work out how much house I can afford. Lets say tax costs me 50,000 that means I'm shopping for a house worth 450,000.
If tax gets abolished can I suddenly afford a better house, OR does that 450,000 house just become a 500,000 house because everyone with my income is looking for the same sort of house. Market forces and all that.
Does that explain it better?
Apr 6th 2004, 11:37 am
#10
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Why not all of Australia?
Apr 6th 2004, 12:26 pm
#11
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Posts: 164
Cutgrass,
I think I see what you are getting at. My understanding is that the prices advertised don't include the stamp duty, so if you see it advertised for £250,000 then you add all the other stuff on top, therefore a $250,000 should only be $250,000 and not $250,000 plus stamp duty. When you advertise a house in the UK you don't include any extras in the price (solicitor fees) and nor do they.
Hope that helps
Adrian
I think I see what you are getting at. My understanding is that the prices advertised don't include the stamp duty, so if you see it advertised for £250,000 then you add all the other stuff on top, therefore a $250,000 should only be $250,000 and not $250,000 plus stamp duty. When you advertise a house in the UK you don't include any extras in the price (solicitor fees) and nor do they.
Hope that helps
Adrian
Apr 6th 2004, 7:04 pm
#12
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Heah come de law of unintended consequences!
Putting more first time buyers back into the property market will allow the present owners to sell easier. This will allow them to buy upmarket: the upmarket prices will rise as a result.
My read, anyway.
Putting more first time buyers back into the property market will allow the present owners to sell easier. This will allow them to buy upmarket: the upmarket prices will rise as a result.
My read, anyway.
Apr 6th 2004, 8:35 pm
#13
Joined: Aug 2003
Posts: 11,149
Originally posted by cadabra
Why not all of Australia?
Why not all of Australia?
There will be some impact from what Rog says but it will be interesting to see what the extra burden does to the ever growing investor market.
Apr 6th 2004, 10:52 pm
#14
Joined: Aug 2003
Posts: 11,149
Originally posted by Rog Williams
Heah come de law of unintended consequences!
Putting more first time buyers back into the property market will allow the present owners to sell easier. This will allow them to buy upmarket: the upmarket prices will rise as a result.
My read, anyway.
Heah come de law of unintended consequences!
Putting more first time buyers back into the property market will allow the present owners to sell easier. This will allow them to buy upmarket: the upmarket prices will rise as a result.
My read, anyway.
http://www.smh.com.au/articles/2004/...222468831.html
The changes to land tax may make economic sense, but it is dangerous politics, writes Mark Coultan.
Who's going to pay for it?" yelled an excitable John Brogden across the table.
"It's actually you and me," replied Michael Egan.
Not quite right, Michael. Although the Treasurer is a paid-up member of the Meriton generation - those people who own investment units in the large apartment developments that have been built during the property boom - John Brogden has only his Bilgola house.
Another person who will not be paying it is Bob Carr, who believes in escaping all these dreadful NSW property taxes by investing outside of the state. He used to own an investment in Victoria, now it's a rural property in New Zealand.
There was none of Michael Egan's usual skiting and hubris about surpluses yesterday as he introduced budget cuts, new taxes and still could not balance the budget. Just an attempt to sweeten the nasties with new concessions for first home buyers.
Despite paying $830,000 for a unit in Pyrmont (not a Meriton building) almost four years ago, Egan said he had not paid any land tax - until now. As he explained, every year he thought his property would go over the land tax threshold but the threshold had risen.
Let's put aside the fact that it's Michael Egan, of course, who decided to raise the threshold.
So why hasn't he paid land tax on a property which by now must be worth more than $1 million? Because for land tax purposes the land value is divided by the number of units on it.
The result is that Meriton-style investors have not been paying land tax. Exactly how many will pay now is open to question. Treasury estimates that around 220,000 to 250,000 people will join 110,000 who already pay.
But the census indicates there are 645,000 householders who are renting in NSW, and there are another 227,000 houses unoccupied, the majority of which are presumably weekenders.
That's 872,000 properties potentially subject to land tax, so unless there are a lot of investors who own multiple properties (and there are plenty), there is going to be a very large number of new land tax payers next year.
Perhaps that's why the backbench sat so quietly. "Broadening the land tax base" might make good economic sense, but it's dangerous politics.
Especially when you slug people who might now want to sell their properties with a new exit stamp duty that will cost $11,250 on a $500,000 property.
Michael Egan, in true Monty Pythonesque language, described his mini-budget as "tough but fair". But it's not particularly tough for wealthy property investors.
By abolishing the threshold, he's made the tax far more regressive. If you've got an investment property worth $1 million, the new system will save you $2511 a year. If you own a $300,000 property you'll pay $1200 more.
Michael Egan called it "a Labor response to difficult circumstances". And all this while the economy is cracking along at 4 per cent growth. What will happen when it slows?
Apr 6th 2004, 10:56 pm
#15
Joined: Aug 2003
Posts: 11,149
Invest in Property Interstate or in shares
The goalposts have been moved for would-be property investors in Sydney, writes Personal Finance Editor Annette Sampson, who says it is time to look at some alternative options.
Here's a thought for would-be investors in Sydney residential property.
Try investing interstate or in shares instead.
The State Government's mini-budget clearly intended to put out the not-welcome mat for property investors.
In addition to bringing some 250,000 investors into the land tax net for the first time, the State Government has introduced its own form of a capital gains tax by hitting investment properties sold after July 1 with a 2.25 per cent exit slug.
And unlike capital gains tax, this tax will apply on the full sale price of the investment property - not just the profit - so long as it exceeds the purchase price by more than 15 per cent.
For an investor buying a property with a land tax value of $250,000 (fortunately land tax applies on the unimproved value of land, not the value of your investment), the so-called reductions to land tax will mean finding an extra $1000 a year for the State Government.
Investors who buy a property for $500,000 and sell it for $600,000 a few years later will also have to pay more than $30,000 in transfer taxes - $17,990 in stamp duty to buy the property plus $13,500 when they sell.
Add capital gains tax for the Federal Government of up to $24,250 and property investment starts to look an expensive proposition.
For the one in 10 baby boomers who have become landlords in recent years, the changes represent a wholesale movement of the goalposts at a time when they are already faced with low rental returns and muted prospects of capital growth.
There is a small opening to sell now to avoid the new taxes, but this may mean selling into a soft market and incurring capital gains tax.
The goalposts have been moved for would-be property investors in Sydney, writes Personal Finance Editor Annette Sampson, who says it is time to look at some alternative options.
Here's a thought for would-be investors in Sydney residential property.
Try investing interstate or in shares instead.
The State Government's mini-budget clearly intended to put out the not-welcome mat for property investors.
In addition to bringing some 250,000 investors into the land tax net for the first time, the State Government has introduced its own form of a capital gains tax by hitting investment properties sold after July 1 with a 2.25 per cent exit slug.
And unlike capital gains tax, this tax will apply on the full sale price of the investment property - not just the profit - so long as it exceeds the purchase price by more than 15 per cent.
For an investor buying a property with a land tax value of $250,000 (fortunately land tax applies on the unimproved value of land, not the value of your investment), the so-called reductions to land tax will mean finding an extra $1000 a year for the State Government.
Investors who buy a property for $500,000 and sell it for $600,000 a few years later will also have to pay more than $30,000 in transfer taxes - $17,990 in stamp duty to buy the property plus $13,500 when they sell.
Add capital gains tax for the Federal Government of up to $24,250 and property investment starts to look an expensive proposition.
For the one in 10 baby boomers who have become landlords in recent years, the changes represent a wholesale movement of the goalposts at a time when they are already faced with low rental returns and muted prospects of capital growth.
There is a small opening to sell now to avoid the new taxes, but this may mean selling into a soft market and incurring capital gains tax.