Ross Mason – Director of Mason Lawyers published the following article today on his Newsletter.
In my last E-News I spoke about how stamp duty is one of those huge “bug bears” of mine. Sadly for First Home Buyers, the bear has justed turned into a monster.
The NSW Government last night announced its budget. In an attempt to stimulate the new home market (and therefore the building industry), the government has announced that from 1 January 2012, exemption from stamp duty for first home buyers will only apply to new homes (including substantially renovated homes and vacant land).
Please note that the announcement only relates to the Stamp Duty on a purchase. The First Home Owners Grant ($7,000.00) will continue to apply to eligible purchases of both new and existing homes.
The Good News – Existing Rules apply to 31 December 2011
The Good News is that the new rules only apply to contracts entered into on and after 1 January 2012.
The existing rules continue to apply until 31 December 2011.
Provided the contract of purchase is entered into (ie. the formal commitment is made to purchase) on or before 31 December 2011 the existing rules will apply.
In short, this means clients can buy an existing home (or a new home) and obtain the exemption but must enter into the contract on or before 31 December 2011.
So for First Home Buyers who are thinking about buying in the near future, there is a still a limited “window of opportunity” to be able to buy an existing property and still obtain the stamp duty concession.
The Position After 1 January 2012
After 1 January 2012, the stamp duty exemption will only apply to eligible purchases of:
- New homes (that is a home which has not been previously occupied or sold as a place of residence) up to $600,000.00. This includes apartments and off the plan purchases.
- Substantially renovated homes up to $600,000.00. Substantial renovations for this purpose are defined as renovations in which all, or substantially all, of a building is removed or replaced.
- A vacant block of residential land (that is intended to be used as the site of a first home) up to $450,000.00.
After 1 January 2012, First Home Buyers will have a difficult choice:
- Buy a new home or substantially renovated home up to $600,000.00. Provided other eligibility criteria is satisfied, no stamp duty will be paid. However, the cost of new homes or substantially renovated properties may be more than the cost of an existing home.
- Buy a vacant block of land up to $450,000.00 and then build. Provided other eligibility criteria is satisfied, no stamp duty will be paid. However, choosing this option may cost more than purchasing an existing home.
- Buy an existing home and pay the stamp duty. To appreciate the difficulty of this choice, the stamp duty on the purchase of an existing home for $450,000.00 is $15,750.00. This is a huge cost for first home buyers and will obviously make it harder for buyers to get into the market.
The First Home Plus Scheme has been an important concession to assist clients in the purchase of their first homes. Unfortunately, the significant change in the operation of the scheme from 1 January 2012 will no doubt make it harder for First Home Buyers.