NSW stamp duty – Article from Domain

“Buyers still find door closed”
Author: By Harvey Grennan
Date: April 22 2004
Publication: Sydney Morning Herald

“The rules have quietly been changed to disqualify some home-seekers from stamp duty concessions.

The State Government’s stamp duty concessions for first-home buyers and new “exit” stamp duty on investors may have unintended consequences.

Agents are already talking of a “mini boom” in the $400,000 to $500,000 category now that first-home buyers will pay no stamp duty on homes up to $500,000.

Sellers of property in this price band are likely to bump up prices because they reckon first-home buyers can now afford it.

Although the new 2.25 per cent stamp duty on the sale of second homes and investment properties (and principal residences sold within two years) will create a rush to unload property up to June 1, it will then encourage investors to hold on to property longer to avoid the tax.

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Another effect of the mini-budget will be to take the pressure off owners at the upper end of the market to sell their properties. With the removal of the annual premium land tax, asset-rich but cash-poor property owners will no longer be forced to sell their expensive homes to pay the tax. Again, this will tend to restrict supply and push up prices, says Kelaher.

The Government has already made two changes to the rules since announcing them. First-home buyers who exchanged contracts before April 3, but who have not yet settled their purchase, can qualify for stamp duty exemption if they and the vendor agree to rescind the contract and enter a new one. If the vendor does not agree to a new contract, the first-home buyer is still left high and dry.

While one hand giveth, the other taketh away. The Office of State Revenue has declared it will be changing the eligibility criteria for stamp duty exemption “to more closely align the First Home Plus scheme with the eligibility criteria for the First Home Owner Grant scheme”.

This is code for disqualifying couples from stamp duty exemption if one of them has owned a home before.

Another anomaly yet to be addressed is how the new exit stamp duty will apply to renovated properties. The duty applies if the sale price exceeds the purchase price by at least 12 per cent but what if the owner has spent more than 12 per cent of the property’s value on renovations? That would mean that paying the new duty would cause a financial loss when it is meant to give the government a share of the “profit”. “