Stamp Duty or Land Tax?
Which is best, an upfront Stamp Duty, or an Annual Land Tax, when buying a property?
Stamp Duty or Land Tax?
New South Wales has proposed following the ACT in removing Stamp Duty on property purchases and replacing this with an annual property tax.
Dominic Perrottet, the NSW Premier, would allow first-time buyers to pay an annual land tax consisting of a $400 fee, plus 0.3 per cent of the land value, instead of charging them a crippling up-front sum.
An example of the two costs is shown as this:
A property costing about $1million would attract stamp duty of $42,000 or an annual land tax of $1,900 a year.
According to sales data analysis by CoreLogic, property owners are on average holding on to a house for 11.3 years, and units for 9.6 years.
On that basis, a home buyer opting for the annual tax, would pay $22,800 over 12 years, instead of the $42,000 up front stamp duty.
If the buyer kept the property for over 22 years, they would end up paying more, on the annual tax basis, compared to stamp duty.
22 years at $1,900 = $41,800
23 years at $1,900 = $43,700
30 years at $1,900 = $57,000
However, many people change property at around 10 years, and these would be the big savers.
10 years at $1,900 per year = $19,000 instead of $42,000.