Changes to property and conveyancing laws in NSW in 2017
There have been many recent changes to NSW property laws affecting conveyancing and real estate transactions. Some important changes are summarised below.
Duty (formerly known as “stamp duty”)
On 30 June 2017 the NSW New Home Grant scheme ended. That scheme provided a grant of $5,000.00 to purchasers of vacant land who intended to commence construction of a new home on the property within 26 weeks of the date of settlement. (See New Home Grant scheme.)
On 30 June 2017 the NSW Office of State Revenue – First Home – New Home scheme ended.
That scheme provided that no duty was payable for the purchase of a new home by a first home buyer up to the value of $550,000 and concessional duty was payable between the value of $550,000 and $650,000.
The scheme also provided that for the purchase of vacant land by a first home owner to construct their new home, for vacant land up to the value of $350,000 no duty was payable and for vacant land between the value of $350,000 and $450,000 concessional duty was payable. (See First Home – New Home scheme.)
From 1 July 2017 the First Home Buyers Assistance scheme was introduced. This scheme provides duty exemptions and concessions for first home buyers whether they are purchasing a new home or an existing home.
No duty is payable by a first home buyer on the purchase of a first home up to the value of $650,000. Concessional duty is payable by a first home buyer on the purchase of a first home valued at between $650,000 and $800,000.
No duty is payable by a first home buyer of vacant land on which they intend to construct their principal place of residence, for vacant land valued up to $350,000. Concessional duty is payable by a first home buyer on vacant land on which they intend to construct their principal place of residence, for vacant land valued between $350,000 and $450,000. (See First Home Buyers Assistance scheme.)
Investors entering into contracts to purchase properties off the plan from 1 July 2017 will now have to pay duty within three months of the date of the contract, unless the property being purchased is intended as their principal place of residence. If the property being purchased off the plan is intended to be the purchaser’s principal place of residence, then the purchaser will have 15 months from the date of the contract to pay the duty. (See Transfer of land or business duty.)
For foreigners purchasing residential property, from 1 July 2017 Foreign Person Surcharge Purchaser Duty, payable in addition to duty, will increase to 8%. (See Surcharge purchaser duty.)
First Home Owner’s Grant
There is still a First Home Owner’s Grant available for first home buyers purchasing new homes only. This grant is not available for first home buyers purchasing existing homes.
The First Home Owner’s Grant of $10,000 is available provided that the new house price does not exceed $600,000.00; or, if buying vacant land with the intention of building a home, the land and building price do not exceed $750,000. (See First Home Owner Grant (New Homes) scheme.)
Foreign Person Land Tax Surcharge
For foreigners who own residential property, from 1 July 2017 the Foreign Person Land Tax Surcharge will increase to 0.75%. Foreign Person Land Tax Surcharge is payable in addition to Land Tax. (See Land tax surcharge.)
Foreign Resident Capital Gains Withholding Tax
For all contracts exchanged after 1 July 2017, the Foreign Resident Capital Gains Withholding Tax requirements will apply to contracts having a price of $750,000 and above.
Vendors will need to obtain from the Australian Taxation Office a Foreign Resident Capital Gain Withholding clearance or variation certificate if the contract price is $750,000 or more. If an ATO clearance or variation certificate is not available, the rate of Foreign Resident Capital Gain Withholding Tax is increased to 12.5%.
The Foreign Resident Capital Gain Withholding regime applies to Australian citizens who are foreign tax residents, as well as to non-Australian citizens. (See Foreign resident capital gains withholding payments.)
Office space and Building Energy Efficiency Certificates
From 1 July 2017 the requirement to have a Building Energy Efficiency Certificate (BEEC) applies to more properties.
Commercial building owners and commercial landlords will be required to provide a BEEC when selling or leasing commercial office space when the building’s nett lettable area is greater than 1000 square metres. Sellers and lessors must acquire a BEEC from the Department of the Environment and Energy before putting the property on the market for sale or lease.
The BEEC discloses the building’s energy efficiency rating and must appear in all forms of advertising material for the building. It must be provided to the buyer or tenant at the time of sale or lease.
Failure to comply may result in fines up to $210,000 and fines of up to $21,000 per day of breach for subsequent offences. Compliance is monitored and penalties will apply to any sellers, landlords and agents who do not comply with these disclosure obligations. (See the federal government’s Commercial Building Disclosure Program.)
Vendor disclosure obligations
From 1 September 2017, there are additional vendor disclosure obligations affecting contracts and options for the purchase of property. A vendor is now also required to attach the following to the contract or option:
- An additional sewer diagram where necessary to show the location of sewer lines in relation to the property
- All strata by-laws in force for the strata scheme of which the property is a part
- A new warning statement alerting potential purchasers to the possible presence of loose-fill asbestos in certain properties
Vendor warranties in contracts
From 1 September 2017, vendor warranties implied in contracts include a warranty (or promise) that at the contract date, the strata scheme of which the property is a part has not passed a motion that a Strata Renewal Proposal warrants further investigation, a Strata Renewal Committee has been or is required to be established to give effect to such resolution, which is not recorded in the minutes of the meeting recording such resolution. (See Changes to vendor disclosure requirements from 1 September 2017.)
Foreign owners – unoccupied residential property
The recent federal budget also announced that foreign owners of residential properties left unoccupied or unavailable to rent for six months in any one year or more will pay an annual charge equivalent to the Foreign Investment Application Fee paid by the foreign investor when they purchased the property. The minimum fee payable is $5,500 per year. (See Reducing Pressure on Housing Affordability.)