Recently there have been some changes regarding property laws in NSW.
Some of these are minor, others will have more of an impact.
There are also future policy shifts being discussed at present surrounding tenancy laws that will have an impact on landlords & tenants.
I thought we could have a brief look at some of the changes.
Keep in mind that I could dedicate an entire article to each section. So I’ll keep it as brief as I can & look at some of the new key information.
LAND TAX
The NSW Government announced that the threshold for land tax to apply will be frozen at $1,075,000.
Previously the tax free threshold has moved & increased as property prices have also increased. Put simply, the freezing of the threshold means that land tax will apply to more properties moving forward. These changes are calculated to bring in an extra $1.5b for the government over the next few years.
Owner occupied properties (your primary residence) are generally not affected by land tax. It can apply to other investment properties.
As land tax is calculated on the combined value of land (not on each individual property) we will see more landlords having to pay land tax over the coming years.
But as with most things, it’s a bit of a catch 22…
If you are eligible for land tax all of a sudden, that also means your property investments are worth more too.
As is always the case, if you want more specific advice about this topic, have a chat with your accountant.
ENVIRONMENTAL & BUILDING STANDARDS
Improvements in sustainability continue to be closely monitored. This year has seen the introduction of new environmental regulations aimed at reducing the carbon footprint & energy efficiency of buildings.
There have been changes to BASIX ratings. BASIX stands for Building Sustainability Index & is a sustainability assessment rating tool for residential buildings.
Some of these changes include new houses & apartment complexes to achieve better energy & thermal performance. This is designed to reduce the energy needs for heating & cooling.
These are changes that will start to take place over the next 10 years.
If you haven’t heard of this before, the BASIX compliance assessment forms part of the development approval process.
Some of these changes will increase the cost of building however those will be offset by annual savings on energy bills. There is an estimated $1,000 saving per year for the average household in lower energy prices.
FOREIGN INVESTMENT
Starting from 2025 the foreign purchase duty will increase from 8% to 9%. A moderate increase. The land tax a foreign purchaser pays also increases by one percent, from 4% to 5%.
According to the data, there are approximately 20,000 foreign owned residential properties in NSW. However to put that into perspective, that is equivalent to 0.6% NSW properties.
These increases are expected to raise approximately $1.68b over the next 4 years.
NEW ZONING
Changes to NSW zoning laws are also on the table again. Some of the major focuses on zoning & development changes are tied to public transport.
Dubbed Transport-Oriented-Development, the NSW Government has identified multiple train stations across Sydney & categorised them into development phases.
I think we’ll also see the state government come in over the top of local councils if the council doesn’t move quickly enough.
In parallel to this, there is to be a higher focus on allowing dual occupancies (duplexes) in R2 zoned areas. The thinking is double the amount of properties in the same amount of space.
I guess you could sum this up by saying – we’re going to continue to see much more high density (high rise) close to public transport & more ‘smaller’ property types such as duplexes & terraces being built. Hopefully a school or two also gets built along the way!
RENTAL TENANCY
If you’re still reading then good! But pay attention to the following as this may be a more immediate set of changes that will affect landlords & tenants.
The NSW Government is proposing some new reforms. The one that has garnered the most attention is ending no grounds evictions. If these changes become law it will change the way a tenant can be moved from a property.
Some of the reasons a lease can be ended may include:
- The tenant doing the wrong thing (arrears, damage)
- The sale of the property
- The property is about to have significant repairs or renovations completed
- An owner or a family member is moving into the property
Interestingly, it may become law that the landlord/agent is required to provide evidence with the termination notice provided to the tenant. Not sure what form this evidence will take, maybe a builder quote?
Interestingly x 2, is that if the repairs & renovation reason is used to give notice to the tenant, then the property may not be able to be advertised for up to 4 weeks. This would be in an effort to avoid landlords & agents skirting around this rule.
There are also proposed changes in the minimum notice period that must be provided to a tenant. These changes are due to come into effect in 2025, but as yet we don’t have a clear picture of the exact changes or when they apply from.
Bit of information in this article. As I said at the beginning, could bang on for a whole article on each separate section.
Some of the take aways are…
- We’re going to keep seeing a focus on high rise apartment complexes especially close to train stations.
- More people are going to be in for a rude shock with land tax.
- The proposed tenancy laws will have a significant impact on tenant / landlord relationships.
And as there is some information on tax included in here let me add a disclaimer…
I’m not an accountant. Speak to one if you want to know more.
As is always the best idea, reach out for a chat with any questions about how these changes may impact you & your property.
