AU Heavy-duty tax hits home buyers
Property Here - Sunday, August 18, 2013
Stamp duty in Australia is high compared with the rest of the world. Source: News Limited
STAMP duty, one of the most frustrating taxes for property buyers in Australia, is higher here than much of the developed world.
New research by accounting network UHY examined property taxes in 25 countries and found that high-end purchases hurt Australian buyers the most, but we are expensive at all price levels.
Lowering your stamp duty is a tougher task than escaping other tax hits, but property experts say some strategies are possible.
UHY Haines Norton found a $US500,000 ($545, 000) property attracts tax at 3.7 per cent of the purchase price, while a $US350,000 ($382, 000) purchase brings a 3.2 per cent tax hit. This ranks poorly alongside similar western countries such as the US, which is below 1 per cent, and Canada, below 1.3 per cent.
Australians who buy a $US3.5 million ($3.82 million) property will pay 5.3 per cent of the purchase price in taxes, the fourth highest rate in the study, behind India, Spain and Britain.
Dario Nazzari, a partner and indirect tax specialist at UHY, says stamp duty comprises the majority of property taxes, and raked in more than $1.2 billion for state governments in the 2011-12 financial year.
"Aside from making it harder to enter the homeowner market, higher property purchase taxes may discourage people from moving interstate for a new job," he says.
Nazzari says unlike land tax, which people can minimise by buying in different states and with different structures, stamp duty is hard to avoid, and he does not see the costs falling soon. "At the moment it's probably difficult because governments are looking to plug deficits."
Buyers' few choices include seeking cheaper properties, which attract a lower rate, or targeting Queensland, where stamp duty rates are about one-third the cost of other states.
Real estate author, academic and investor Peter Koulizos says stamp duty is a huge barrier because it is a large proportion of a deposit, and is often a disincentive to investors, who can buy shares without paying the tax.
Koulizos says people can lower their stamp duty costs by building. "Buy the land, then build - you only pay stamp duty on the land," he says. "If you're a first-home buyer, there are many concessions and some of them include stamp duty."
Read more: http://www.news.com.au/realestate/buying/heavyduty-tax-hits-home-buyers/story-fndban6l-1226699897961#ixzz2clV956Ef