1. Amendment - Changes to capital gains tax (CGT) withholding provisions
From 1 July 2017, the foreign resident CGT withholding rate will increase from 10% to 12.5%, and the current threshold will be reduced from $2 million to $750,000. All vendors intending to sell their property will be required to arrange a clearance certificate with the Australian Taxation Office if the value of their property is above $750,000 to ensure that there is no withholding tax retained by a purchaser on completion.
Foreign and temporary residents will not be able to access the main residence exemption for CGT purposes. However there will be transitional measures for existing properties until June 2019.
2. New - GST withholding provisions to apply from 1 July 2018
From 1 July 2018, purchasers of newly-constructed residential properties or new subdivisions will be required at settlement to remit the GST directly to the ATO, rather than the developer vendor. This has come about because some developer vendors fail to remit the GST. At settlement of a purchase, the purchaser will be required to arrange for a settlement cheque to be drawn in favour of the ATO for the GST and remit the payment to the ATO on behalf of the developer vendor.
More often that not, contracts for the supply of newly-constructed residential property or new subdivisions involve the application of the margin scheme. This involves the developer vendor's calculation of 1/11 of the margin between the acquisition costs and sale price of the property. It will be interesting to see how easy it will be to obtain the necessary information from the developer vendor prior to settlement of the contract. The additional attendances on the part of the purchaser will also inevitably increase the cost of the conveyance. These additional costs should be passed back onto the vendor by the inclusion of special conditions in the contract.
3. Amendment - Foreign investor surcharges increased
Currently a foreign investor will pay surcharge duty of 4% on the purchase of real property. From 1 July 2017 this surcharge will increase to 8% per cent.
Further, foreign investors will pay increased annual land tax surcharges up from 0.75% to 2% each year.
4. Amendment - Off the plan stamp duty concessions for investors to be abolished
A major incentive to purchasing property "off the plan" has been the concession that provides for the delay in the payment of stamp duty for 12 months after the date of exchange.
From 1 July 2017 this concession will be abolished for any investors purchasing "off the plan". The New South Wales Government hopes that this amendment will give first homebuyers a competitive advantage over baby boomer investors.
5. New - First home buyers exemption from stamp duty
From 1 July 2017, first home buyers will be exempt from paying stamp duty on the purchase of property with a purchase price of up to $650,000 and will receive a discount on their stamp duty for the purchase of property up to $800,000.
In addition, first home owners will be eligible for a grant of $10,000 for buying a new home worth up to $600,000.
Builders also will receive a grant of $10,000 for building a new home worth up to $750,000.