VIC & NSW are taking new measures to support first home buyers

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As we are sure you’re aware, the state governments in NSW and Victoria are set to make some changes to support first home buyers. Some of these changes also impact investors and Australian property vendors living overseas. As both governments seek ways to fund the new measures.

Changes to support first home buyers in NSW will take effect from July 1

The NSW State Government is introducing new measures. To assist first home buyers from July 1, 2017. These changes are specific to owner-occupiers and designed to make it easier for people to purchase a first home. They include:

No stamp duty for first home buyers of all homes. Including existing dwellings and new dwellings up to $650,000.

Concessional stamp duty for first home buyers of all homes between $650,000 and $800,000.

Abolition of stamp duty charged on lender’s mortgage insurance for all home buyers.

Although the threshold for the first home owner’s grant of $10,000 will reduce to $600,000 for new properties. Futhermore, it will remain at $750,000 for first home buyers building a new home.

To fund the first home buyer affordability measures. The following changes will be made that will impact other investors:

Foreign investors will pay double the surcharge on stamp duty (rising to 8% from 4%). Also, the surcharge on land tax will also rise to 2%.

Investors will no longer get a 12 month stamp duty deferral for off the plan purchases. Also, owner occupier home buyers purchasing off the plan will still be entitled to the 12 month deferral.

Changes to stamp duty and grants in Victoria effective from July 1

The Victorian State Government has recently introduced changes to stamp duty and grants. In order to support first home buyers and encourage them to purchase property in regional Victoria. These changes include:

First home buyers will pay no stamp duty on properties. Value below $600,000 that they intend to use as their principal place of residence.

First home buyers will pay reduce stamp duty on properties value between $600,000 and $750,000. That they intend to use as their principal place of residence.

First home buyers may be eligible for a grant of $20,000. To buy their principal place of residence in regional Victoria for homes valued up to $750,000.

Investors will lose their off the plan stamp duty concessions. These concessions are now only available to buyers. Who intend to use their off-the-plan property as their principal place of residence.

Owners of vacant properties will be levied with a Vacant Residential Property Tax of 1% of the capital improve value of the property. This measure has been introduced to encourage owners to make their vacant properties. Available for rent or purchase. (Exemptions apply to holiday homes, decease estates and temporary overseas owners.)

Changes to the new capital gains withholding regime

Legislation was introduce last year to combat low levels of compliance by foreign residents. Paying tax in respect to Australian capital gains. Last month, the Commonwealth Government introduced significant changes to the current scheme. So that from July 1, 2017 it will apply to the sale of all real estate. Over the market value threshold of $750,000. And will require purchasers to withhold an increase amount of 12.5% of the purchase price.

Australians are deeme to be foreign residents for tax purposes. If they do not reside in Australia. For example, expats who have set up a permanent home in another country. Expats must declare any income earned in Australia including any capital gains. Any expats considering selling their home or investment property in Australia. With a market value above $750,000, will be caught by these propose new laws. The recent changes also affect vendors who co-own property with expats or other foreign residents. As the purchaser will be require to withhold an amount proportional to the foreign resident’s interest in the property.

If your client is intending to move abroad permanently and sell their property later. They may need to rethink the timing of the sale. Particularly if the property has been their principal place of residence. As this would usually be exempt from any capital gains tax if they sold it when they were residing in Australia. There are some variations, so if your client could potentially become an expat vendor. They should seek advice from their lawyer or tax accountant.

Source: LawLab Conveyancing