The recently announced property reforms commence from 1 July 2017. While they are aimed at assisting first home buyers, such reforms will also affect non-first home buyers as follows:
NSW New Home Grant Scheme
The NSW New Home Grant Scheme will be closed. This scheme currently provides eligible non-first home buyers, including investors, with a $5,000 reduction off stamp duty on purchases of new homes, off the plan property and vacant land and can be claimed once a financial year.
Stamp Duty for off-the-plan property
Deferring payment of stamp duty on off-the-plan property will no longer be available to investors. Currently all purchasers may defer paying stamp duty on off-the-plan purchases for 15 months, which provides an additional 12 months on top of the usual time frame of 3 months to pay stamp duty. Whilst deferring stamp duty will no longer be available for investors, it will remain available for purchasers who will live in a property that they purchase off-the-plan.
Duty on Lender’s Mortgage Insurance
Duty on Lender’s Mortgage Insurance will be abolished for all home buyers. Lenders Mortgage Insurance is required by many lenders for purchasers who do not have the required minimum deposit saved. Duty on Lender’s Mortgage Insurance is currently calculated at the rate of 9% of the premium.
Foreign persons – Surcharge Purchaser duty
Foreign persons need to pay Surcharge Purchaser Duty in addition to any stamp duty payable on their purchase. Surcharge Purchaser Duty will now be calculated at a rate of 8% of the dutiable value of the property, being double the current rate of 4%.
Foreign Persons – Surcharge Land Tax
Foreign persons need to pay Surcharge Land Tax which is an annual tax in addition to land tax. Surcharge Land Tax will now be calculated at a rate of 2% of the taxable value of the property, increasing from the current rate of 0.75%. There is no threshold or principal place of residence exemptions for foreign persons.
Again, the above reforms come into effect from 1 July 2017. Accordingly, all contracts exchanged from 1 July 2017 will be subject to the provisions of the property reforms. If you would like to discuss how the above reforms may affect you, please contact Coutts Lawyers & Conveyancers today.