NSW plan to make stamp duty optional...
If you won the lotto & were given the choice, what would you choose?
A. $100,000 p.a. for the rest of your life
B. $1,000,000 lump sum today
What option are you choosing; A or B ?
Now, if you purchased a $1,000,000 home & were given the choice, which option would you choose?
A. $4,081 p.a. in stamp duty tax for as long as you own the property
B. $40,811 lump sum today
What option are you choosing; A or B ?
This scenario is exactly what the NSW Government is looking to implement.
We look to explore the recent announcement to provide you with the information (although limited) so you can understand why the Government is changing the taxes and how this will affect your specific circumstances.
Initially, buyers would have a choice: a one-off stamp duty bill, or a relatively modest annual property tax.
The opt-in would be once only. If a buyer chose to pay property tax, their house, apartment or commercial building would forever be subject to the annual tax.
“We have a model that we think works,
Stamp duty impedes the ability for young people to get into their first home. Particularly in Sydney, it has become very, very difficult”
the Treasurer said.
Replacing stamp duty with annual property taxes has long been seen as one of the unachievable goals of tax policy reform. Stamp duty is a disincentive to buying property, and leads people to live longer in homes that don’t suit them.
State governments haven’t been able to survive without stamp duties because of the huge revenue they generate.
One problem is that stamp duties are pro-cyclical, which means they generate huge amounts of money when the economy is firing, and dry up in recessions. They increase budget risk and unpredictability.
We don’t have the details of the proposal yet, with many experts believing the devil will be in the details.
As humans we are not wired to choose today over tomorrow, but we also hate to feel like we are missing out on something.
If we feel like we are losing something, then we avoid it, we don’t do it.
This is why so many people do not save & invest. Saving sounds like you are giving something up or losing something today. But you’re not. It is giving yourself a gift today of peace of mind, certainty, of a secure financial future.
So it will be interesting to see how this mindset is applied to the new optional stamp duty. Will people be wired to choose today over tomorrow?
We believe many people will choose to save upfront in stamp duty, reducing the barriers of entry which will create more buyers, with bigger budgets, because they will be saving the 4% on stamp duty. We see this having an impact on property prices short term, but not nearly as big as most real estate agents or buyers agents would have you believe.
With everything that happens with finances, taxes and government legislation, understand your choices, understand why the Government are changing taxes & understand how this will affect you & your family.