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14 July 2010 - New Property Tax Affects NSW Market
 The new property tax, the Torrens Assurance Levy, taxes the portion of residential and commercial property above $500,000. The rate is 0.2 per cent on any amount over $500,000 and 0.25 per cent on the portion of the sale over $1 million. This means you will pay an additional $200 on a property sold for $600,000, $1,000 on a property sold for $1 million, and $2,500 on a property sold for 1.6 million.
While this does not seem like a lot of money for each property, it will add up. The NSW Government is expecting to make $90 million in the first year from the Torrens Assurance Levy. As the median price for three or four bedroom properties in Sydney is $600,000, most property sales will incur the additional tax.
Interestingly, the government has no plans to index the tax thresholds against the CPI or as property prices rise over time. This means that as property prices increase over time, more people will have to pay the tax. Real estate experts already predict that the median property price in Sydney will rise to $1 million in the next decade. This is borne out by the projected income figures the government published in the budget figures, with the government expecting $105 million in the 2011 to 2012 financial year, $110 million in the next year and $118 million in the 2013 to 2014 financial year.
As property prices in Sydney are already among the highest around the country, it is likely that some investors will start to look interstate for properties that do not incur so much tax. Properties in Queensland and Western Australia are becoming increasingly popular for investors, as the property prices in these states are lower than NSW properties.
The Torrens Assurance Fund insures property holders against document fraud on the property. While the new levy is supposed to increase the security of the fund, the proceeds will go to consolidated revenue and then the NSW Government will decide when and how much to contribute to the Torrens Assurance Fund.
The Torrens Assurance Fund has potential liabilities of $20 million at present, which is why the NSW Government requires the new levy, according to the Lands Minister, Tony Kelly, in an interview published by the Sydney Morning Herald on July 8.
In the interview, Mr Kelly said the government would “incorporate developments in the property market into the updated estimates in the half-yearly review in December.” “Actual tax receipts would depend on the level and composition of property market activity,” he said.
The new tax is not popular with all and the Opposition Leader, Barry O’Farrell, has promised to repeal the tax if elected to government in March. Meanwhile, the new tax will continue to add costs to buying property in NSW.
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