Budget fillip likely for property market
Cutting stamp duty on property sales and opening up conveyancing to non-lawyers are two of the feel-good moves tipped for next month's Budget statement.
Monday, April 19th 1999, 12:00AM
by Paul McBeth
Cutting stamp duty on property sales and opening up conveyancing to non-lawyers are two of the feel-good moves tipped for next month's Budget statement.
The Budget rumour mill has already been grinding out odds and ends likely to appease individuals and small businesses. National President of the Real Estate Institute of New Zealand, Max Oliver, says these two moves in particular would boost the property market "as it's all additional cost".
Oliver says that freeing up conveyancing has been on the cards since MP Phil Goff's Private Member's bill and the subsequent select committee report, which recommended establishing an industry body and a course of study for those offering conveyancing services. While he agrees it will offer home buyers greater choice, Oliver isn't so sure it will bring them substantial cost savings.
"The market out there is very competitive and a lot of the smaller lawyers have cut their costs right back, so I'm not sure whether the conveyancers could do it for much less."
As for cutting stamp duty, any moves will predominantly benefit those buying lifestyle blocks, farms or businesses as well as people leasing out commercial investment properties. Oliver says that residential properties are currently exempt, but cutting duty will certainly help a lot of investors and small businesses.
The Government made $186 million out of both stamp and cheque duties in 1997/98: the duties are a particular bugbear of ACT MP Owen Jennings, who calls them "anachronistic, indiscriminate and inequitable". Stamp duty can add thousands or even tens of thousands of dollars to a transaction (see 'stamp duty explained')
Jennings prepared a Private Member's Bill earlier this year to abolish these duties (it's currently waiting to go to a select committee). He says that recent checks with the Government confirm that they are considering the issue "although they might just be going to fiddle with the rate".
However, Jennings says "Our view as a political party is that the Government's revenue should be collected in the most transparent way."
Stamp Duty Explained
Stamp duty is a charge that applies to specific legal documents: it's paid by the person acquiring any property or right under these documents. There are two types of stamp duty: conveyance duty (when certain property is permanently transferred from one owner to another) and lease duty (charged on leases and rentals of non-residential property).
Some current exemptions from stamp duty are:
- Mortgages and mortgage discharges
- Transfers of residential homes if the property is less than 4500 square metres
- Transfers of bare land under 4500 square metres (as long as you intend to build a house on it); and
- The purchase of your first farm
If you buy a chunk of land that's larger than 4500 square metres but it's still just part of your residential property, you can apply for an exemption from the Commissioner of Inland Revenue from paying any duty. If you use some of it for grazing cows, growing grapes or whatever, you will have to pay duty but only on the portion of land which is non-residential.
Similarly, if you buy a property that is only partly residential (such as a shop with a house attached), you won't be charged stamp duty on the lease or transfer of the residential portion.
Conveyance duty rates:
If your transaction is liable for stamp duty, you will have to pay it at the following rates on the value of the property including GST:
Up to $50,000 1%
$50,000 to $100,000 $500 plus 1.5% on amount over
$50,000
Over $100,000 $1,250 plus 2% on amount over
$100,000
Lease duty rates:
You pay this on leases of commercial land and buildings (including farm land) and variations to commercial leases (such as a rent increase or lease renewal).
Lease for one year or more 40c/$100 or part of $100 of the maximum annual rental payable under the lease
Lease for less than one year 40c/$100 or part of $100 of the maximum rental which may become payable over the lease term
You can find out more on stamp duty in the Inland Revenue Department's booklet IR 665.
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