Buying a house is already one of the largest transactions that most people will make in their lifetime. The sheer expense of it alone means that the substantial, additional costs of stamp duty can be quite an issue. On top of this, the further additional cost that is imposed is that of mortgage duty, which in NSW, is $5.00 up to $16,000.00, then $4.00 for every $1,000.00 above $16,000.00. Considering the already hefty expenses, mortgage duty was undoubtedly seen to be a very unwelcomed burden by those purchasing property.
The NSW parliament has recognized the overwhelming expenses of potential property purchasers, and in an aim to attack the affordability of purchasing property had initiated a strategy to eventually abolish mortgage duty altogether.
This strategy, set out in the State Revenue and Other Legislation Amendment (Budget) Act 2007 (particularly as it amends the Duties Act 1997 to include s 221B), intended to be a gradual process. Since 2007, it has been taking place in three stages.
The first stage, occurring as of 1 September 2007, concerned the abolition of duty on mortgages for the purposes of owner occupied housing. In particular, such purposes included financing the acquisition of a residence, or of residential land, financing alterations or additions to a residence and repaying another advance if the advance to be repaid was made for the purposes of owner occupied housing.
The second stage, taking place as of 1 July 2008, makes sure that duty will not be chargeable on advances made to natural persons on or after that date for investment housing. For this purpose, ‘investment housing’ is defined as any private dwelling house used, or intended to be used or sold for the business or investment purposes by the borrower. Further, an advance is made for the purpose of investment housing’ if it is to be applied wholly or predominantly for one or more of the following purposes: financing the acquisition of investment housing, financing the construction of investment housing, financing alterations or additions to investment housing, repaying another advance, if the advance to be repaid was made for the purpose of investment housing.
Finally, the third and final stage is the complete abolition of mortgage duty. This is set to take place as of 1 July 2012. In this way, NSW mortgage duty will not be chargeable on advances made on or after 1 July 2012.