" Stamp Duty " Relief !

Stamp Duty is something the states added to conveyancing legislation over a hundred years ago.  It simply required what can be termed a "Tax Stamp " to be affixed to the documents to certify the legal procedure has been followed, and it was a useful form of government revenue.

The value of that stamp was directly related to the price paid for the property.  It was more an irritant than a sales obstacle in those early days because of the low cost of property, but after the end of the second world war, our returning troops and our open door to migration created a housing shortage.

We simply failed to build enough new homes to serve demand and steady price escalation is leaving home ownership out of reach of many families.   The stamp duty required on the conveyancing of an average New South Wales home is about $34,000.

Political consensus makes it likely a new bill will give home buyers the choice of paying stamp duty up front or opting to supplant it with an annual " land tax " similar to the council rates system.  If adopted, that $ 34,000 stamp duty would be replaced with a $500 payment and annual land tax calculated at the rate of 0.3 percent of the unimproved land value.

That would be welcomed by elderly Australians living in big unsuitable homes and wanting to downsize, but terrified of the capital loss stamp duty would impose.  The government expects all homes to eventually convert from stamp duty to land tax and once a property enters the land tax regime the stamp duty option will be unavailable.

The New South Wales Treasurer estimates that the average unimproved value of the land a house is sitting on would be about $437,500 and this would attract an annual land tax of $ 1812.

That is an option that will have many potential home buyers weighing up carefully.  Many people are specially proud that they own the home they live in outrightly.  They may see that annual land tax bill to be associated with a form of " rent " and prefer to stick with the stamp duty up front option.

There will be a considerable time delay while this bill is debated in parliament and this may cause home sale interruptions as buyers wait for this new legislation to become law.  It is being suggested that people who buy and pay stamp duty up front will have the right to get a refund and convert the purchase to land tax once the legislation comes into effect.

The main advantage is the removal of the need for people to put off a home purchase while they work to save both the money needed for a mortgage deposit, and the money they need to pay up front to settle the stamp duty bill.  That stamp duty lump sum would be reduced to a small annual payment similar to the council rating system.

No doubt the thousands of home owners who have paid stamp duty up front will be doing calculations on the back of an envelope to see how this new legislation will affect their forward housing plans.