What are the revenue implications when buying or selling property in NSW?

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• Duties
• Land Tax
• Income Tax
• Capital Gains Tax
• Goods and Services Tax
• Conclusion

When buying or selling property in NSW, most people focus on the exchange of monies between the buyer and the seller. However, the actual cost of the property is not the expense involved with the sale of property in NSW. When buying or selling land, this transaction will attract a range of taxes that you will have to pay to the government. It is useful to know what taxes a property transaction will attract so that you can effectively budget and forecast your expenses in relation to the sale or purchase of the property.

The taxes that a property transaction will attract include:

• Duties
• Land Tax
• Income Tax
• Capital Gains Tax
• Goods and Services Tax

Duties

Duties are payable on property that qualifies as a dutiable property under the Duties Act. An example of this type of tax is mortgage duty. Mortgage duties are payable on the amount of money that is secured by a mortgage. However, mortgage duties haven now been abolished and are now only payable by companies or people who are not “natural” persons.

Land Tax

Land tax is payable on the property that you own either individually or jointly in NSW. However, it is not payable on your residential property. This means that the following property will attract land tax:

• Holiday houses
• Rural land
• Investment property
• Commercial spaces including shops and warehouses

Income Tax

This type of tax is payable on personal income and unearned income such as dividends, interest and rent. Usually, if you are receiving money that supports you like an income would then this will be taxable. The incentive behind this tax is to distribute wealth equality across the Australian population. Both corporations and individuals are subject to this tax

Capital Gains Tax

Capital Gains Tax will have to be paid on profits that you receive when you sell a property.  This is because any profits that you make are seen to be an income, which is taxable. However, CGT is included within your income tax and will not be taxed separately. CGT is most commonly taxed on the sale of real estate but will not apply to personal property such as your residential home, car and other personal assets.

Goods and Services Tax

GST is a tax which applies to the sale of goods and services in Australia. It is taxed at a rate of 10% and must be paid every time a good or service is sold to a purchaser. Many business structures are exempt from paying GST and so this is something that you should look into before entering into a transaction.

Conclusion

While there are a large number of taxes that you may need to pay when buying or selling land in NSW, there are also a number of situations where you may be exempt from paying these taxes. To ensure that you are paying the right taxes and are not paying taxes you are exempt from, it is a good idea to speak with a property lawyer to get some legal advice.