State governments in both New South Wales and Queensland have recently amended land tax legislation. Since property prices and cost of living are sensitive issues, both governments have found changes to be controversial.
Whether you are a property investor or first home buyer, it is important to get up-to-date advice to understand how changing policies may affect you.
New South Wales has now introduced legislation to implement the land tax and stamp duty reforms announced in the state budget earlier this year. The legislation was introduced in October 2022 and changes are due to commence in January2023.
If the scheme goes ahead as planned, an eligible first home buyer purchasing a property worth up to $1.5million may choose whether to pay an upfront amount for transfer duty (stamp duty) or an annual property tax.
The new scheme – First Home Buyer Choice – will sit alongside existing first homeowner assistance, including the:
The NSW scheme will be available to individual purchasers. You can buy property with other people, but not as a company or trust. You must also be over 18, at least one buyer must be an Australian citizen or permanent resident and you or your spouse must not have owned or co-owned residential property in Australia.
As the name suggests, the scheme is aimed at first home buyers, so you must also move into the property within 12 months and live in it continuously for at least 6 months.
This scheme will only apply to contracts entered into on or after 16 January 2023. However, first home buyers who sign a contract after the legislation passes and before 15 January 2023 will be able to opt in and apply for a refund of any transfer duty already paid.
If you choose the annual tax option:
If you choose to pay the upfront transfer duty:
If you are eligible for a stamp duty exemption under the existing scheme, you would not choose to pay an annual property tax. However for someone only eligible for any concession or exemption, the annual property tax may be a better choice. You would also need to consider your own situation and plans for the property and advice from your accountant or financial planner.
Buyers and investors with property in Queensland and other states may have been watching planned changes to land tax laws in Queensland with some concern.
Changes to the law have passed and were due to commence on 30 June 2023.
Under the new laws, property owners in Queensland will have their liability for land tax in Queensland based on all property owned in Australia. Currently tax is calculated based on the value of land owned in Queensland over a certain threshold value.
The effect of the changes would be that property owners in Queensland may pay higher land tax on that property if they also own land in another state.
There have been concerns about how the proposal might affect, for example, someone with an investment in Queensland and a family home in another state. While it appears owners would be able to take steps to exclude their principal residence, or to restructure investments, at least it would mean an increase in administration time ahead of June 2023.
The panned changes had put the Queensland Government under pressure on several fronts – including from the real estate industry. Other state and territory leaders had also indicated they would withhold land ownership information making the changes difficult to implement.
In response to pressure, the Queensland changes have been abandoned. For now.
In New South Wales, the legislation still needs to pass, any may face opposition in the upper house.
What is clear is that property ownership is an issue on the agenda of all Australian governments, and we are watching developments in all states closely.
If you have questions or would like more information about how these proposed changes and developments could affect you, please call 1800 867 113 or to organise a confidential discussion with our property law experts at a time that suits you, click here
Lindsay McGregor is a lawyer and the Head of Property in our Avant Law team. He has been working in property related matters for almost 20 years. He was previously a partner at a highly regarded, national firm and has considerable experience in property transactions across Australia. He has previously acted for some of the Country’s biggest property investors and developers and can use this experience to your advantage.
Disclaimer: The information in this article does not constitute legal advice or other professional advice and should not be relied upon as such. It is intended only to provide a summary and general overview on matters of interest and it is not intended to be comprehensive. You should seek legal or other professional advice before acting or relying on any of its content. The information in this article is current to 27 October 2022.
Liability limited by a scheme approved under Professional Standards Legislation. Legal practitioners employed by Avant Law Pty Limited are members of the scheme.