On 19 June, NSW Treasurer Dominic Perrottet announced his budget for 2017-18. While NSW has a big budget and a $4.5billion surplus raised through privatisations of schools, hospitals and the justice system, there were some losers as well as winners. Here we cover the main changes to duties and taxes.
DUTIES
First Home Buyers Assistance
From 1 July 2017 the ‘First Home New Home’ scheme will be replaced by the First Home Buyers Assistance scheme. First home buyers will not have to pay duty for both new and existing homes for properties up to $650,000. The duty will be reduced for amounts between $650,000 and $800,000. There is no change to the cap for vacant land.
Shared Equity Scheme
From 1 July 2017, the shared equity scheme applies where a home buyer purchases a property with an approved equity partner, being NSW Land and Housing Corporation, a registered community housing provider or approved persons. This scheme helps people who may not otherwise be able to afford their home on their own to become a home owner by purchasing with an equity partner.
The shared equity scheme is a scheme where:
- The home buyer must acquire not less than a 20 per cent share in the ownership of the property
- The equity partner has the right to a share in any capital gains on sale or refinancing but has no right of occupation
- The home buyer can purchase more equity in the property from the equity partner at a price determined under the arrangement between the home buyer and the equity partner.
Any subsequent transfers of equity from the equity partner to the home buyer will be exempt from further duty. If the dutiable value of the property meets the requirements of the First Home Buyers Assistance, the home buyer will be entitled to the exemption or concession.
A home owner may be entitled to the first home owner grant if the total purchase price falls under the cap and all other conditions of the scheme are met.
New Home Grant Scheme
The New Home Grant scheme, providing a $5,000 New Home Grant will close on 30 June 2017.
First Home Owner Grant (New Homes)
From 1 July 2017, first home owners can access a $10,000 grant for:
- Building a new home under a home building contract where the contract price, when added with the land value, does not exceed $750,000
- A new home being built by an owner builder where the value of the land and building does not exceed $750,000 or
- Purchasing a new home worth up to $600,000.
Purchases ‘off the plan’ by investors
From 1 July 2017, all residential purchases by investors will be excluded from the 12 month off the plan transfer duty liability deferral.
Purchasers who wish to obtain the deferral will need to declare an intention to occupy the property as their principal place of residence (PPR).
If a purchaser claims an entitlement to the deferral, but the land is not occupied as the purchaser’s PPR for a continuous period of 6 months, commencing no later than 12 months after completion of the sale or transfer, interest and penalty tax may apply from the liability date.
LAND TAX
Principal place of residence
The principal place of residence exemption will be extended to land used and occupied by an owner under a shared equity scheme as defined above. The exemption will apply from the 2018 tax year.
SURCHARGE PURCHASER DUTY
Rate of duty
From 1 July 2017, the surcharge purchaser duty (payable by foreign persons) rate will increase from 4 per cent to 8 per cent.
Permanent residents (including New Zealand citizens)
From 20 June 2017, permanent residents, including New Zealand citizens holding a Special Category visa (subclass 444), will be exempt from surcharge purchaser duty on their principal place of residence, if they occupy the home for a continuous period of 200 days within 12 months of purchase. The exemption will be granted if the person declares that they will complete the 200 day residence requirement.
Australian-based developers
An Australian-based developer that is a foreign person may be entitled to a refund of surcharge purchaser duty based on dwellings sold (other than to an associated person) if they are an Australian corporation. This applies to an eligible developer who acquired land on or after 21 June 2016. The corporation or a related body corporate of the corporation must have constructed a new home on the residential land to which the residential-related property relates after completion of the transfer of the property to the corporation.
A refund will be payable in respect of the sale of a new home. A dwelling that has been rented or occupied at any time while owned by the developer is not eligible for a refund.
Commercial residential property
Commercial residential property will be exempt from surcharge purchaser duty. The Chief Commissioner will make a determination identifying classes of commercial residential property.
SURCHARGE LAND TAX
Rate of tax
From the 2018 tax year, the surcharge land tax rate (payable by foreign persons) will increase from 0.75 per cent to 2 per cent.
Permanent residents (including New Zealand citizens)
From the 2018 tax year, permanent residents, including New Zealand citizens holding a Special Category visa (subclass 444), will be exempt from surcharge land tax on their principal place of residence, if they occupy the home for a continuous period of 200 days in the land tax year.
The exemption will be granted if the person declares that they will complete the 200 day residency requirement.
Australian-based developer
An Australian-based developer that is a foreign person may be entitled to a refund of surcharge land tax if they are an Australian corporation. The corporation or a related body corporate of the corporation must have constructed a new home on the residential land and after the taxing date, the corporation must have sold the new home to a person other than an associated person of the corporation.
The proportion of surcharge land tax refunded will be based on the proportion of dwellings sold (other than to an associated person) within 5 years of the completion of the purchase of the land by the developer. Where separate dwellings are sold progressively over the 5 year period, a developer may be granted partial refunds.
The exemption is retrospective to an eligible company.
- In cases where the land was acquired before 21 June 2016, the 5 years commences from 21 June 2016
- If land was acquired after 21 June 2016, the 5 years commences from time the land was acquired.
A refund will be payable in respect of the sale of a new home. A dwelling that has been rented or occupied at any time while owned by the developer is not eligible for a refund.
Commercial residential property
From 2018 tax year, commercial residential property will be exempt from surcharge land tax. The Chief Commissioner will make a determination identifying classes of commercial residential property.
INSURANCE DUTY
Lenders Mortgage Insurance (LMI)
From 1 July 2017, an LMI policy will be exempt insurance in NSW meaning an insurer who issues a LMI policy will no longer need to pay duty on this premium where the policy is over property in NSW. LMI means insurance taken out by lenders to cover loss arising from default by the mortgagor.
Crop and Livestock Insurance
From 1 January 2018 crop and livestock insurance will not be liable to duty.
Small business exemption
From 1 January 2018 small businesses are not liable to duty on certain types of insurance including commercial vehicle insurance, occupational indemnity insurance and product and public liability insurance.
2017-18 BUDGETS FOR OTHER AUSTRALIAN STATES
Changes were announced in the following duties and taxes for each of these states:
Victorian Budget
- Land transfer duty for first home owners
- Motor vehicle duty
- First Home Owner Grant
- ‘Off the Plan Duty
- Property Valuations
- Crop and livestock insurance
- Vacant land tax
- Payroll tax
Queensland Budget
- Land Tax Surcharge
- Payroll Tax Rebate
- First Home Owner Grant
South Australian Budget
- ‘Off-the-plan’ stamp duty concession
- ‘Off-the-plan’ purchaser grant
- Stamp Duty Surcharge
- Land tax exemption
- Payroll Tax
Tasmanian Budget
- First Home Owners Grant
- Duty on House and Land packages
- Payroll tax rebate
Read more here about budget announcements for Vic, Qld, SA & Tas here.
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