Gary Chiert, KPMG Indirect Tax Partner, on the housing affordability/stamp duty changes in the NSW State Budget.
“NSW is following Victoria which recently announced similar changes for first home buyers – and there is no evidence it is cooling the market in Victoria. In fact it could add fuel to the lower end.
Abolition of lenders mortgage insurance duty is a welcome step towards ultimate abolition of all insurance duty – but LMI generally targets low deposit borrowers and this seems inconsistent with APRA calls for banks to increase required equity.
Duties and land taxes on foreign land buyers is good politics but not necessarily good policy.
Exempting foreign developers is a very welcome move although:
Another welcome move is an intention to retrospectively clarify which commercial residential premises are exempt from surcharge duty and surcharge land tax. It is hoped that the exemption will extend to student accommodation.
The increased foreign surcharges will make NSW the highest taxed State for foreign investors in residential property. The crown for the highest tax previously went to Victoria, with a 7 percent duty surcharge (on top of the usual 5.5 percent rate) and 1.5 percent land tax surcharge. In NSW the effective tax rate for foreign investors will now be 13.5 percent duty (5.5 percent plus 8 percent surcharge) and a land tax surcharge of 2 percent.”
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