2007 State Budget by Paul Anderson | June 2007 Area of Expertise | Business & Property
On 20 June 2007, the New South Wales Treasurer announced changes to state taxes as part of the 2007 Budget. The changes have been introduced as part of the State Revenue Other Legislation Amendment (Budget) Bill 2007. The changes affect: •
land tax;
•
mortgage duty; and
•
stamp duty payable in respect of motor vehicles.
Land Tax As from the 2008 land tax year, the land tax rate will be reduced from 1.7% to 1.6%. The annual indexation of the threshold and the 3 year averaging of land values and the tax free threshold will continue to apply. The reduction represents an annual saving of $148 for an investor with a $500,000 taxable property. It is estimated that the change will cost the New South Wales Government $110 million in income.
Mortgage Duty At present, stamp duty payable on mortgages is due to be abolished as from 1 January 2011. Mortgage duty will now be abolished in 3 stages commencing on 1 September 2007 with the final abolition scheduled on 1 July 2009. The first stage takes effect on 1 September 2007 and relates to mortgages in connection with owner occupied housing. The second stage takes effect on 1 July 2008 and is an exemption for mortgages in connection with investment housing. Stamp duty on all other mortgages will be abolished as from 1 July 2009. Stage 1 and 2 exemptions will be available only if the borrower under the mortgage, or if there is more than one borrower, each of the borrowers, is a natural person.
1
T U R KSLEGAL
TUR KALERT
Owner Occupied Housing Mortgage duty will not be charged in respect of a mortgage if the mortgage secures an advance made from 1 September 2007 for the purpose of owner occupied housing and no other advance. If the mortgage does secure an advance made for another purpose, mortgage duty is not chargeable in respect of the advance made for the purpose of owner occupied housing. An advance is made for the purpose of owner occupied housing if it is to be applied wholly or predominantly for one or more of the following purposes: •
financing the acquisition of a residence;
•
financing the construction of a residence;
•
financing alterations or additions to a residence;
•
financing the acquisition of residential land; or
•
repaying another advance, if the advance to be repaid was made for the purpose of owner occupied housing.
A residence is defined as a private dwelling house that is used and occupied or intended to be used and occupied by the borrower, or by any of the borrowers, as a place of residence. It is estimated that an owner occupier (other than a first home buyer) taking out a $500,000 mortgage will save stamp duty of $1,941 as from 1 September 2007.
Investment Housing Mortgage duty will not be charged in respect of a mortgage if the mortgage secures an advance made from 1 July 2008 for the purpose of investment housing and no other advance. If the mortgage does secure an advance made for another purpose, mortgage duty will not be chargeable in respect of the advance made for the purpose of investment housing. An advance is made for the purpose of investment housing if it is to be applied wholly or predominantly for one or more of the following purposes: •
financing the acquisition of investment housing;
•
financing the construction of investment housing;
•
financing alterations or additions to investment housing; or
•
repaying another advance, if the advance to be repaid was made for the purposes of investment housing.
Investment housing is defined as any private dwelling house that is used or intended to be used or sold for business or investment purposes (or both) by the borrower or by any one of the borrowers.
2
T U R KSLEGAL
TUR KALERT
For the purposes of the stage 1 and stage 2 exemptions, “alterations or additions� in relation to a private dwelling house include: a)
any improvements to the parcel of land on which the dwelling house is constructed; and
b)
the maintenance, repair or renovation of a dwelling house or of an improvement referred to in paragraph (a).
Motor Vehicles To assist those suffering hardship as a result of the recent oods in the Hunter and on the Central Coast, the Government will provide a rebate of stamp duty for replacement motor vehicles where the insurance claim does not cover this cost.
Conclusion Although any reduction in duty is to be welcomed, the dollar savings, particularly in relation to land tax at the lower end, are modest. The announcement in relation to mortgage duty may even slow the winter property market as buyers hold back from home purchases until the savings commence on 1 September 2007.
For more information, please contact: Paul Anderson Partner T: 02 8257 5742 paul.anderson@turkslegal.com.au
Sydney | Level 29, Angel Place, 123 Pitt Street, Sydney, NSW 2000 | T: 02 8257 5700 | F: 02 9239 0922 Melbourne | Level 10 (North Tower) 459 Collins Street , Melbourne, VIC 3000 | T: 03 8600 5000 | F: 03 8600 5099
Business & Property | Commercial Disputes | Insurance & Financial Services Workers Compensation | Workplace Relations www.turkslegal.com.au
This Tur k Aler t is cur rent at its date of public ation. While eve r y c a re h a s b e e n t a k e n i n t h e p re p a rat i o n o f t h i s Tu r k Al e r t i t d o e s n o t co n s t i t u te l e g a l advice and should not b e relied up on for this pur p ose. Sp ec i f i c l e g a l a dv i ce s h o u l d b e s o u g ht o n p a r t i c u l a r m at te r s. Tu r k s Le g a l d o e s n o t a c ce p t resp onsibilit y for any er rors in or omissions from this Tur kAle r t . Th i s Tu r k Al e r t i s co py r i g ht a n d n o p a r t m ay b e re p ro d u ce d i n a ny fo r m w i t h o u t t h e p er mission of Tur ksLegal. For any enquir ies, please contac t t h e a u t h o r o f t h i s Tu r k Al e r t .