On Monday 5 Nov 2018, the NSW Treasurer announced that NSW will be the first state or territory in Australia to index Stamp Duty brackets to Consumer Price Index (CPI) guaranteeing everyone in the housing market a fairer deal on future property transactions. He said:

“We haven’t seen any significant action on Stamp Duty brackets since 1986 when the median house price in Sydney was $100,000, now it has climbed to $1 million”

Over the past 15 years (2002-2017), bracket creep has resulted in the average rate of Stamp Duty payable increasing from 3.37 per cent to 4.05 per cent as the median house price in Sydney rose from around $400,000 to $1 million .

If Stamp Duty brackets had been indexed to CPI 15 years ago the amount payable on a $500,000 home would today be around $2,000 lower (an 11.0 per cent tax cut), while the Stamp Duty payable on a $1.5 million home would be around $6,400 lower (a 9.4 per cent tax cut).

NOTE HOWEVER:    The duty on the sale of a $100k (1986 average value) house $1,990 or about 2% of that $100,000 value. Fast forward about 30 years and the average value of a Sydney house is about $1m and the duty is $40,490 or about 4% of the $1m. This is 20 times more duty, but more tellingly, a doubling of the average rate of duty over the 30 years (having eliminated, in this way, the inflation effect). Had thresholds been indexed, since 1986, this doubling could have been avoided.

So, how generous is this? Is it too little too late? Or is something better than nothing?

THE START DATE will be transactions on or after 1 July 2019 (noting that duty, in NSW, on the contract – not on the transfer of land, as it is in Victoria).

The general NSW Stamp Duty Rates are:

Dutiable value Duty rate
$0 to $14,000 $1.25 for every $100 or part of the value
$14,001 to $30,000 $175 plus $1.50 for every $100, that the value exceeds $14,000
$30,001 to $80,000 $415 plus $1.75 for every $100, that the value exceeds $30,000
$80,001 to $300,000 $1,290 plus $3.50 for every $100, that the value exceeds $80,000
$300,001 to $1,000,000 $8,990 plus $4.50 for every $100, that the value exceeds $300,000
Over $1,000,000 $40,490 plus $5.50 for every $100, that the value exceeds $1,000,000
Premium property duty:                  over $3,000,000 $150,490 plus $7.00 for every $100, that the value exceeds $3,000,000

 

FJM 24.11.18

[NSW Treasury website: Treasurer’s Media Release; LTN 213, 5/11/18; Tax Month – November 2018]

 

CPD questions (answers available)

  1. Has the NSW Treasurer announced that the thresholds for each of the step up, in marginal rates, on land transfer duty, will be indexed (helping to keep average rates of duty, on the average value house about the same)?
  2. What will it be indexed to?
  3. When will this measure start?
  4. In round numbers, what was the average value of a house, in Sydney, in 1986?
  5. In round numbers, what was the average rate of duty on the sale of such a house?
  6. In round numbers, what is the average value of a house, in Sydney, now?
  7. In round numbers, what is the average rate of duty on the sale of a house with that value?
  8. By how much has the average rate of duty increased since 1986 (on the sale of houses at the respective average values assumed)?

 

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