As part of its COVID-19 relief measures, the NSW state government announced a yearlong initiative to cut stamp duty and drive construction. It is the latest in first home buyers assistance grants and schemes designed to assist in economic recovery.
First-time homebuyers will benefit most from the latest cuts. Under the changes, buyers of newly-built homes with values of $800,000 or less can forgo the stamp duty. The threshold on vacant land also rises from $350,000 to $400,000, phasing out at $500,000. Reduced concessions on existing properties with price tags exceeding $800,000 also are available.
When paired with a First Home Owner Grant – at a maximum benefit of $32,335 – stamp duty cuts will provide tremendous savings for first-time buyers. The stamp cuts commence 1st August 2020 and will remain in effect for one year.
At the start of August 2020, the Mosman real estate market had 300 properties listed for sale, with 100 priced around or under the $1 million mark. Of these properties, 42 were two-bedders, six were studios, with the remainder one-bedders. The stamp duty concessions are good news for many of these sellers, making their properties more attractive to first-time buyers.
According to NSW Premier Gladys Berejiklian, an estimated 6,000 NSW first home buyers will benefit from the 2020 stamp duty cuts on new properties.
The cut in stamp duty makes homeownership more affordable for young adults who may currently be living with their parents in order to save a deposit – the stamp duty saving could fast track their purchase ability by months.
The stamp duty rate cut also provides a unique opportunity for sellers in the Mosman area by increasing the buyer pool. Tradies also benefit from the stamp tax cut, as demand for their services will increase as first-time buyers and property owners rush to take full advantage of the grants and recent cut before it expires next year.
Abolishing Stamp Duty Permanently
With the popularity of the announced cuts, permanently abolishing stamp duty is back on the reform agenda. A hot topic for decades, tax experts and economists have advised governments to rid themselves of the unpopular housing tax.
Stamp duty is inefficient due to its massive impost on a single transaction. For each dollar of revenue raised, it costs the economy 30 cents, according to a report from the Grattan Institute. Some economists instead favour land tax levied on the value of land applied to all landholders equally.
Tax changes are fraught with potential challenges, including resistance from homeowners who already paid stamp tax and might feel they are being subjected to double taxation.
For now, first-time homebuyers in NSW should take full advantage of the stamp tax cut and other schemes before they expire.
Talk with your real estate agent or conveyancer if you need help predicting total savings specific to buyers of a home you are selling or one you’re potentially buying.
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