Tax changes

08 June 2010

NSW Home Builders’ Bonus

“New Housing Concession”: Stamp duty concessions will be provided for the construction of new homes sold off the plan between 1 July 2010 and 30 June 2012. Buyers of new dwellings costing up to $600,000 will receive a 25 per cent cut in normal duties, worth up to $5,600, if building has already started.

Alternatively, buyers purchasing off-the-plan – before construction is underway – will pay zero stamp duty. This concession is worth up to $22,500. The greater concession for purchasing off-the-plan will assist the financing of new developments and help new home buyers.

“Seniors Principal Place of Residence Duty Exemption”: People aged over 65 selling an existing property and buying a newly constructed home costing up to $600,000 will pay zero transfer duty. This measure will contribute both to the goal of helping older home owners seeking to downsize their home, and the goal of encouraging new home construction. The exemption will apply to sales between 1 July 2010 and 30 June 2012.

To be eligible for either concession/exemption the value of vacant land must not exceed $400 000 and new homes must not exceed $600 000.

The agreement for sale or transfer must be either a new home purchase, or off the plan purchase, or a vacant land purchase. A “new home” is a home that has not previously been occupied or sold as a place of residence, and includes a substantially renovated home. Construction of a new home commences at the time when the laying of the foundations of the new home, or of the building in which it is located begins. For an off the plan purchase of a substantially renovated home, construction commences when construction of new or replacement parts of the home, or the building in which it is located, begins. Demolition work does not count as construction work.

Agreements for sale or transfers of vacant land or a new home will be eligible for consideration under the scheme where they are entered into on or after 1 July 2010 and before 1 July 2012. However, an off the plan purchase will be eligible only if the agreement for sale is:

  • entered into on or after 1 July 2010 and before 1 July 2011, and completed by 31 December 2012; OR
  • entered into on or after 1 July 2011 and before 1 July 2012, and completed by 31 December 2013.

For vacant land, construction must normally commence with the laying of foundations within 26 weeks after the agreement for sale or transfer is entered into and the building work must be normally completed within 18 months after the laying of foundations begins.

An agreement for sale or transfer of a new home is not eligible if it replaces an agreement for sale or transfer made before 1 July 2010 that was for substantially the same property.

More details are available in the fact sheet available here.

Some additional information, not covered in the fact sheet, is available in a Q&A here.

These measures are clearly very positive. Nonetheless the Urban Taskforce has identified some implementation issues (and unintended consequences) which we will be pursuing with the government.

Ad valorem levy

As previously announced, an increase in fees for registration of land transfers will take effect in 2010-11. Currently a $190 flat fee is charged. An additional fee of 0.2 per cent of the transfer value will apply for transfers valued above $500,000 and up to $1,000,000, or $1,000 plus 0.25 per cent for transfers above $1,000,000.

This is expect to raise $96 million in 2010/2011, $429 milion over the 4 year forward estimates.

Stamp duty on mortgages

As previously announced, stamp duty on mortgages, non-real property transfers, and marketable securities will be abolished from 1 July 2012, costing $278 million over the two years from July 2012 – July 2014.