As many who have recently obtained a home loan in the Perth area probably noticed, stamp duty taxes can often brutalise those who are buying a home.
As most mortgage brokers can tell you, the tentative recovery of the Perth real estate market has been a mixed blessing for many. It has helped those who are selling their properties but hurts those who are buying because they not only have to pay higher price for their home, but they also have to pay one of the highest tax rates in the civilised world.
So, how high is the WA stamp tax and the average Australian stamp tax compared to other world markets? According to a recent study by UHY Haines Norton, which is a globally-respected US accounting network, only India, Spain and Britain have higher tax on property purchases. For comparison, the US is below 1% and Canada is below 1.3%. As we will soon see, Australia’s tax is quite high in comparison to the other main English-speaking countries.
A property that sells for $545,000 in Australia would face an average tax of 3.7% of the purchase price compared to 3.65% for WA, while one selling for $382,000 would be taxed at 3.2% average for Australia compared to 3.183% in WA. Anyone who can afford to pay $3.82 million for their home would be taxed at an average Australian rate of 5.3%, compared to 4.9% in WA.
In the financial year 2011-2012, state governments collected over $1.2 billion in stamp duty tax. According to Dario Nazzari, indirect tax specialist and partner at UHY, stamp duty taxes make it more difficult for buyers to enter the market and can discourage people from moving into some states for jobs.
Why Perth and WA are Great Markets for First Home Buyers
Luckily for many first home buyers who have procured home loans in Perth, first home buyers who purchase homes for less than $500,000 are exempt from Stamp Duty Tax. This more than compensates for the recent changes that reduced the First Home Owners Grant (FHOG) from $7,000 to $3,000.
Queensland is King
In Queensland, rates are roughly a third of what they are in the rest of Australia, at least on the lower end, putting them on a level with the US and Canada. This makes Queensland an attractive place for many Australians who are moving and want to purchase a home.
The New Home Strategy
Many buyers are purchasing properties and then erecting new homes, because only the properties are subject to stamp duty. This effectively builds a nice “discount” into a new home for those who aren’t first home buyers. According to our financial planners, those who are buying investment properties in the Perth area can find great benefits in this particular strategy if it is executed correctly.
What Can You Do?
In WA, unless you are a first home buyer or you want to use the new home strategy, you are going to be stuck with high stamp duty taxes. The good news is that our financial planners help many people looking for home loans in Perth manage their finances to a point where the stamp duty tax isn’t a barrier to buying a home.
In an era of high taxes and a recovering real estate market, it has become essential to do everything else right. You now need to manage your money correctly to maximise your savings and minimise your spending. Any home that you buy or sell must be bought for as low a price as possible and sold for as high a price as possible.
Income on investment properties has to be maximised and expenditures minimised. Any time you take out a loan, whether it’s a business loan, investment loan or home loan on your Perth property, you simply can’t afford not to obtain the most favourable terms and interest rates.
Anything less than superior performance and diligence in this area can cost you thousands of dollars, especially by the time you retire, due to compounding.
In the current financial climate, you can’t afford to “go it alone.” In a maze of taxes, government programs, variable rates, fixed rates, “creative” terms for home and business loans, anyone looking to profit in Perth has to have someone who knows what they are doing on their side.
At Purely Finance, we are independent, which allows us to deliver maximum service with minimum hassle.
Call (08) 9472 9766 today; it may be the most profitable phone call you ever make.