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Tax cuts for homebuyers

Author: Joe Hildebrand
Source: news.com.au
http://www.news.com.au/business/

ALMOST 200,000 homebuyers a year will save up to $2000 when buying a home in a surprise $2.6 billion tax cut in the New South Wales State Budget.

Treasurer Michael Costa yesterday scrapped mortgage duties and cut land taxes in an effort to fire up the property market in the face of rising interest rates.

However, the Treasurer made no move on payroll tax, despite Premier Morris Iemma declaring that reducing the so-called "tax on jobs" was his priority.

The Government will abolish mortgage duty on owner-occupied homes from September 1, 2007, delivering 186,000 homebuyers a $138 million saving next year.

This amounts to $1000 for a $250,000 mortgage or $2000 for a $500,000 mortgage.

Over the coming four years the Government will also abolish mortgage duty on investment and commercial property, a total cut of $1.36 billion over four years.

The land tax rate will also be cut from 1.7 per cent to 1.6 per cent next year, saving taxpayers $467 million over four years.

This will reduce most land tax bills - which apply only to investment or commercial properties - by 6 per cent, or $10 for every $10,000 worth of land value.

The Government will also abolish stamp duty on hire of goods and on leases, saving taxpayers $570 million over four years on items such as rental DVDs and cars and property where the rental cost is higher than $20,000 a year.

Mr Costa also acknowledged the Government needed money and - in a clear shift from Mr Iemma's position - said cutting payroll tax was not the economic cure-all people thought.

"Interest rates is one of our risks, that's true," he said.

"Given our revenues are so dependent on the property market ... that's the reason for tax cuts in those areas."

However, The Daily Telegraph understands coming Budgets will also show a staged reduction of the 6 per cent payroll tax rate down to Victoria's level of just over 5 per cent.

The Property Council of Australia applauded the measure, saying it would ease pressure on homeowners and investors and could improve the rental market.

Executive director Ken Morrison said the cuts would provide relief to business owners and make NSW more attractive to investors.

Business groups applauded the Budget but lamented the lack of immediate payroll tax relief.

"Overall this is a good Budget, but it could have been so much more," NSW Business Chamber CEO Kevin MacDonald said.

"The Budget is in surplus, expenditure has been contained, a strategy for significant infrastructure investment is in place, yet despite $4.5 billion in additional revenue, the Government has refused to provide taxation relief," he said.

For newlyweds Graeme and Natalie Brill, the honeymoon period will last long after buying their first home together.

With the abolition of mortgage duty two years earlier than planned, the young couple will be among homeowners eligible for savings of between $1000 and $2000 off average home loans.

Currently only first home buyers are exempt from mortgage duty - another hurdle for those looking to start a family and move into a bigger home.