The governments of Victoria and New South Wales have announced important tax relief measures in a bid to stimulate the real estate market after the COVID-19 recession.
They recognise that construction of new housing is an effective countermeasure against a recession. As a result, the Victorian and New South Wales governments have changed the way home buyers pay stamp duty, which is basically a government tax on property transactions.
Stamp duty has been a barrier that prevented many buyers (particularly first home buyers) from purchasing a new home, thereby keeping them out of the market.
This is great news for first-home buyers, retirees looking to downsize, and investors who may enjoy substantial savings from the stamp duty waiver.
This targeted measure will spur construction of new housing putting Australians to work and into homes.
Same Goal Different Approach
While both Victoria and New South Wales want to give prospective home buyers a helping hand, their approaches differ. That’s why we need to look at each state individually.
Stamp Duty Discounts in Victoria
For residential properties with a value of up to $1 million, the Victorian government introduced a 50% discount on stamp duty for new residential properties. For existing residential properties, the discount on stamp duty is 25%.
This waiver was introduced on 25th November 2020 and will be in effect until 30th June 2021.
To put this into perspective, a Victorian who purchases a newly built $1million residential property will save $27,500. On the other hand, a buyer purchasing an existing residential property in the same price bracket will save $13,750.
Starting in January 2021, there will also be a 50% discount on stamp duty on the purchase of commercial and industrial properties in regional Victoria.
Buyers in New South Wales Can Choose
The New South Wales government has announced that it wants to help citizens achieve their dream of homeownership and grow the economy. To do so, the government is going to give home buyers the option to pay either stamp duty or a new reduced annual property tax.
Scrapping the cost of stamp duty will save NSW residents tens thousands of dollars when they purchase their new homes. These proposed changes are expected to take effect in the second half of 2021.
If you’ve already paid stamp duty on your property, then you don’t have to pay the annual property tax.
Under this new scheme, first time home buyers could have access to a $25,000 grant along with the choice to either pay once-off stamp duty or an annual property tax.
Residential and commercial investors will also profit from these proposed changes. When purchasing an investment property, they may consider opting into the annual tax because they may potentially qualify for certain tax deductions.
Disclaimer: The information provided herein is for general information purposes only and does not constitute specific advice. It should not be relied upon for the purposes of entering into any legal or financial commitments. Specific advice should be obtained from a suitably qualified professional before adopting any investment/financial strategy.