As of July 1 2017, foreign investors in residential property will be liable to pay increased surcharges on stamp duty and land tax. They will also no longer be eligible to defer stamp duty payment for off-the-plan purchases as they are currently able to do.
Your best bet is to get in as soon as possible before the changes take place.
These changes are coming into effect soon as part of the NSW government's housing affordability package that aims to use the increased revenue from foreign investor purchases to fund concession schemes for first home buyers.
If you're a foreign investor looking to enter the luxury property market in NSW, your best bet is to get in as soon as possible before the changes take place and you find yourself up for a great deal more in taxes with fewer concessions.
The good news is that there is still time before the package is introduced. If you're sitting on the fence debating whether or not you should buy now or later, don't wait any longer! We'll take a look at the current situation for foreign investors and how this is changing, to give you an idea of how much you could save by buying your luxury apartment before July 1.
What is the current situation for foreign investors in NSW?
Under current legislation, foreign buyers of residential real estate in NSW are subjected to a 4 per cent surcharge on stamp duty, as well as a 0.75 per cent surcharge on land tax. The stamp duty surcharge was introduced under the 2016 State Budget, and is payable on top of the stamp duty on the property purchased.
You can use the Surcharge Purchaser Duty calculator on the NSW Office of State Revenue website to determine the amount payable. For example, if the value of the property you're buying is $2 million, the total stamp duty you'll need to pay will be $95,490. Under existing legislation, the 4 per cent stamp duty surcharge is calculated as a percentage of the property's value. In the case of a property worth $2 million, it would be $80,000.
Therefore, the total amount payable on a $2 million property – currently – would be $175,490 (stamp duty of $95,490 plus the $80,000 surcharge). This is not including the land tax surcharge, and doesn't factor in those mortgage repayments or additional costs such as strata, valuations or pest and building inspections.
For the remainder of June, the total stamp duty plus foreign investor surcharge payable will be:
- $63,490 for a property valued at $800,000
- $54,990 for a property valued at $700,000
- $46,490.00 for a property valued at $600,000
What is changing, and how will it affect you?
As of July 1 2017, the amount that foreign investors will have to pay for residential real estate purchases is set to increase significantly. The 4 per cent surcharge is doubling to 8 per cent. Therefore, the surcharge on a $2 million property would increase to $160,000.
The 4 per cent surcharge is doubling to 8 per cent.
Your total payable – stamp duty of $95,490 plus the $160,000 surcharge – would be $255,490.
The doubling of the stamp duty surcharge applies to all properties, no matter their value. As of July 1, the combined stamp duty tax plus foreign investor surcharge payable will be:
- $95,490 for a property valued at $800,000
- $82,990 for a property valued at $700,000
- $70,490 for a property valued at $600,000
The impact of this is obvious: As a foreign investor, your borrowing power is drastically reduced, as you'll be up for a lot more.
In addition to the stamp duty surcharge increase, land tax for foreign investors is being bumped up from 0.75 per cent to 2 per cent. The NSW government is also eliminating the ability of foreign investors to defer their stamp duty payment for off-the-plan property for a 12-month period.
If you want to invest in luxury real estate, the time is now
All contracts that are signed before the government's package comes into effect will be governed by existing legislation. That means that if you get in before July 1, you won't be subjected to the stamp duty and land tax surcharge increases and will still be able to defer your stamp duty payment for 12 months. So, the good news is that you've still got a couple of weeks to get in before the changes hit.
Plus, with Crown Group's Waterfall complex launching this Saturday June 17, you've got a great incentive to do so! Located in the heart of the burgeoning Waterloo district, with spectacular design features and all the facilities you could want in an apartment complex, Waterfall offers the very best in luxury living.
Get in touch with Crown Group today to get your hands on some of Sydney's prime luxury real estate before legislative changes are introduced.