Money Talks: New Tax Shock

NSW property buyers slugged with a new tax

Overshadowed by the federal budget announcement in May, the introduction to New South Wales of the ‘Ad Valorem’ tax - a land transfer charge calculated on the value of a property being sold - is set to impact many property buyers.

The proposed new tax will be applied to residential and commercial properties selling for more than $500,000. It will be effective from 1 July 2010.

Local mortgage broker for Mortgage Choice, Peter Johnson said, “There are many costs associated with purchasing property and while it isn’t good to see NSW buyers slugged with one more, it demonstrates that those looking to buy need to make sure they are up to date with all taxes and expenses associated with their property purchase. That way, they can make the correct assumptions within their budget.”

The new tax will be imposed at a rate of 0.2% for land transactions between $500,000 and $1 million. For purchases above $1 million, the tax will be charged at a rate of 0.25%.

In all cases the first $500,000 will be exempt. For example, the levy on a $600,000 property will be $200.

“As higher interest rates impact consumer sentiment, this new tax has the potential to damage housing demand. It’s a shame many homebuyers and investors are facing this extra expense, but for some buyers, the benefits offered by long-term property investment will most probably outweigh the cost,” Peter said.