The phasing out of stamp duty on commercial property sales under $1.5 million come July 1 should help boost the number of businesses looking to buy their own premises, encourage investors and increase the ACT’s competitiveness, according to industry figures.
Colliers International Manager Investment Services, Matthew Winter said the move would eliminate duty on around 70 per cent of all commercial transactions in the ACT, giving businesses more choice when it came to deciding whether to purchase a commercial property.
Before July 2017, the conveyance duty on a commercial property of $1.45 million would have been $73,710; this fell to $35,550 from 1 July 2017 and will become zero on 1 July 2018.
“This can be a significant upfront cost for a small business trying to manage its cash flow,” Mr Winter said. “Removing this expense could mean that a small business operator who previously thought owning their own premise was completely out of reach can now seriously consider this option.”
Laing+Simmons Commercial Managing Director Alex Smith said the stamp duty removal would help small businesses decide whether they could buy their own commercial premises.
But he said buyers needed to make sure the fundamentals of their purchasing decision were right and treat the stamp duty saving as a bonus.
“Buyers will save up to 5 per cent on a $1.5 million purchase which is $75,000. A healthy saving but buyers must still consider the fundamentals of their decision to purchase. While it will not be the catalyst for deciding to buy a commercial property under $1.5 million it will certainly help buyers make the decision if they are sitting on the fence,” he said.
Retail Sales & Leasing Executive at Laing+Simmons Commercial, Chris Antos said small businesses would be the winners, including those in need of offices, restaurant and cafe owners, and retailers, whether they be owner-occupiers or investors.
The move also encouraged local and interstate investors and provided an incentive for those focused on residential to consider the commercial sector.
“In Canberra, there are a lot of residential investors but maybe those are looking to getting into commercial now. This is another reason for them to look at the commercial market as a possible investment opportunity just because the initial costs can be lower,” Mr Antos said.
He said the duty abolition should also mean more affordable rents for small businesses because landlords would not need to pass on the charge.
With the ACT leading the way in stamp duty reductions, the move should give the Territory a competitive advantage.
“We’ve got a few Sydney investors who are looking in Canberra because the returns are higher so I think this is another thing that maybe will get on their radar, and if they can avoid these costs, and I haven’t seen this anywhere else in the country – it’s unique to ACT, which will be really beneficial for the Territory,” he said.
Mr Antos said it would also make it easier to transfer titles and he expected to see a higher rate of commercial transactions.
Generally, less red tape and one less barrier to purchasing property would be good for the ACT economy.
Mr Winter said that with the rise of self-managed super funds being used to purchase commercial assets, the initial acquisition costs were greatly reduced.
“Small business owners will need to weigh up if they want the control offered by owning their own premise – control in design and layout for example and from knowing what their mortgage costs are each month – or the benefits of renting, such as being able to move more easily if they need to expand and not be responsible for unexpected repair costs,” he said.
He also believed the stamp duty abolition would boost the ACT’s competitiveness, “making it cheaper to purchase here, which in turn increases potential returns, and makes the Territory more competitive when weighed against other jurisdictions.”