Martin Schoeddert, director of iRIS property breaks down the new NSW property tax for us.
Property buyers in NSW have just been hit with yet another purchasing tax, whether it be a home, factory, commercial premise or a development site. While buyers already face stamp-duty in NSW, and also have the 'Premium Property Duty ' for residential property over $3 million - the new tax adds another burden of 0.2% on the purchase price in excess of $500,000, and increases to 0.25 % once the purchase price exceeds $1 million. With the median price of the average home in Sydney now approaching $650,000, it's pretty clear to see this is going to be a big money spinner for the government.
To put it in perspective, if you were buying a $600,000 house, you are already up for $22, 490.00 in stamp duty, and now you will get slugged another $200.00 (0.2% of the $100,000.00 over $500,000). Whilst that may not seem a lot, it quickly rises, so a house at $850,000 - you pay $33,790 in stamp duty, and you now pay an extra $700.00.
Purchase price: $600,000
Loan amount: $450,000
You now pay: $1,741.00 s/d on loan
$22,490.00 s/d on purchase
$56.00 'Transfer fee'
Total $24,287.00, plus the new tax !
So let’s extrapolate this out to a development site in Sydney - where there is a chronic housing shortage - and on a Sydney redevelopment of say $150 million (not a huge amount for in real terms) - suddenly the buyer is up for another $375,000, on top of the already exorbitant normal stamp duty, which would stand at nearly $10 million.
The market has already been hit hard by the recent interest rate rises - six in the last seven months and consumer confidence is dropping rapidly in light of the recent share market and dollar falls. The government expects to raise in the vicinity of a new $90 million per year from this new tax, and indicates the funds will go towards new security measures against property fraud.
Regretfully, I can't as yet find out exactly what those new security measures are going to be.
Another concern is how much of a negative impact this new tax will have on the market - a number of years ago a 'Vendor Tax ' was introduced, and that quickly made property investors stop dead in their tracks. We already have very few investors coming back into the marketplace after many years of absence. That tax was quickly abolished as it slowed sales to the extent that the government was collecting less revenue due to fewer transactions.
The Real Estate Institute has called this new tax a direct attack on the family home and the NSW property sector. I call it a desperate grab for more dollars from those people who are perceived as being able to afford it. With education and medical recourses so desperately under-funded, our road system in shambles, and the government continually lining its own pockets, it does make me wonder where the dollars will really go.