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An annual tax instead of stamp duty might fail to leave consumers better off, the professional body cautions.
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Get advice before it’s too late, CA ANZ warns NSW first home buyers
14 October 2022
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CA ANZ has warned first home buyers to get expert advice before jumping at the NSW government’s stamp duty alternative of an annual property tax.
Avoiding the upfront cost of stamp duty might be tempting, senior tax advocate at CA ANZ Susan Franks said, but buyers should evaluate the long-term consequences.
“This first home buyers’ incentive is definitely not ‘one size fits all’, and what’s good for one person may not be the same for someone else,” said Ms Franks.
“There are many factors which will determine whether an individual is better off selecting stamp duty or property tax, including how long you intend to own the property, the type of property you purchase, whether you are going to live in the property or rent it out, and which other concessions at the time of purchase you may be eligible for.”
Ms Franks’ advice comes as legislation to provide an alternative to stamp duty for first-home buyers was introduced into the NSW parliament this week.
Premier Dominic Perrottet revealed the plan to provide the option of paying stamp duty or an annual property tax at the state budget announcement in June.
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Ms Franks warned that the land tax was an ongoing liability that could increase over time.
“The NSW government has announced that property tax increases will be capped at 4 per cent per annum, which is like the cap on your council rates,” she said.
“But with all levels of government needing funds to finance services and debt and local and state governments relying heavily on the taxation of land, there may be pressure to increase future tax rates.”
“First home buyers should be aware that local council rates across NSW are likely to rise, in some areas there are proposals for council rates to increase 28 per cent over four years.”
Ms Franks said to ensure first-home buyers achieved the dream of owning a home without the nightmare of financially over-extending, they should talk to an accountant or other financial expert to evaluate the long-term costs.
“First home buyers also need to be wary of stamp duty savings disappearing into higher housing prices,” said Ms Franks.
“While it is fantastic to get a foot in the door of the property market, care needs to be taken to ensure that first-home buyers do not overreach their financial capacity to service their housing debt in the current environment of increasing interest rates.”
“Crunching the numbers with your accountant is a great way to ensure that your dream home does not turn into a nightmare.”
In the June budget, Mr Perrottet said the alternative to stamp duty for first home buyers would be an annual property tax payment of $400 plus 0.3 per cent of the land value.
It would apply to properties that cost less than $1.5 million and was forecast to cost the state government $729 million over the next four years.
At the time, Mr Perrottet said the choice would help more people enter the property market.
“Stamp duty continues to grow and be an impediment to getting into the property [market],” said the Premier.
“I believe that an annual amount that is paid is better than a substantive upfront figure.”
“It’s the biggest impediment, not just to first home buyers getting into the property market, but also transferring their property.”
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