In my two earlier bulletins I alerted you to the new costs associated with the buying and selling of property in NSW – particularly for non-residents. These new imposts are:
The retention of 12.5% of the purchase price by purchasers (properties $750,000 and above) and remitting this to the ATO.
Additional 8% stamp duty for non-residents.
Additional (annual) Land Tax for non-residents.
A fee (at least $5,000) payable to FIRB to “rubberstamp” purchases by non-residents.
All of these new measures are bundled up into an enhanced level of information sharing between the (Commonwealth) ATO and the (NSW) Office of State Revenue.
Up until these new measures were implemented, it was entirely possible for a non-resident to purchase an investment unit – rent it out for years – and then sell it at a capital gain. And all that time not paying income tax or capital gains tax!
The taxation authorities have been quietly introducing reporting requirements and sharing the data to catch those evading their taxation responsibilities. No-one would have read about these new measures being debated in parliament. They have simply been introduced as a “process”.
I applaud these new measures if it means that those avoiding the payment of their tax obligation will no longer be able to simply repatriate their money overseas.
Where this impacts everyone buying or selling property is a huge increase in the paperwork associated with the process, including:
An application for exemption from the 12.5% withholding provision (8 page document) which must be signed by each and every seller.
A stamp duty application (8 page document) which must be signed by each and every purchaser.
A Land Tax clearance for each and every property being sold.
Stringent new ID requirements.
For the past 20 years or so the actual “mechanics” of conveyancing property have been greatly assisted by the incremental introduction of new technologies. This has had the effect of reducing the real cost of buying/selling property. Typically, in the early 1990’s, the “legals” were often $3,000 – $4,000. Today the fees are more typically down to $2,000- $3,000.
Let’s see how this all beds down – my sense is that there will be upward pressure on the actual costs.