28 June 2005
Savvy property investors are being warned to beware recent tax changes that may make it costly to change financiers after 1 August 2005.
"The Vendor Tax and land tax changes received considerable media coverage after the NSW State Budget but changes to mortgage duty appear to have slipped under the radar," Head of Macquarie's Banking Division, Executive Director Greg Loveday, said yesterday.
"Property investors should be alerted to these tax changes because they may make it more expensive to change financiers after 1 August 2005," Mr Loveday said. "The changes also restrict competition amongst banks as they effectively penalise large borrowers for changing financiers to secure better deals."
From 1 August 2005, the mortgage refinancing concession will be capped at $1 million. This means investors who wish to re-finance their loans with a different lender will be subject to mortgage duty where the amount re-financed exceeds $1 million.
For example, if the amount re-financed is $2.5 million, mortgage duty will be payable on the $1.5 million above the cap, which is approximately $6000. (Mortgage duty is levied at a rate of $4 per $1000 on the excess.)
The changes are expected to generate revenue of $20 million in 2005?06 for the State Government and $25 million in 2006-07.
"It's a disappointment that before the State Budget large borrowers were free to move from one bank to the next and take up the best deal available and that this area of competition has now been restricted because of the impost of mortgage duty," Mr Loveday said.
"This move may force investors to stay put and suffer poor service levels and inflexible loan products or be penalised in the hip pocket if they do decide to change banks."
He said borrowers with loans in excess of $1 million thinking of changing financiers to secure a better deal should act before August 1 or get hit in the hip pocket.
For further information, please contact:
Tel. (61 2) 8232 7029
Mobile. (61 4) 1049 9034