NSW REMOVES A COMPETITIVE BARRIER

NSW REMOVES A COMPETITIVE BARRIER

The 2016 NSW budget has confirmed the removal of stamp duty on documentation. We are delighted to see this charge removed after many years of unfulfilled promises. That the most prosperous state in Australia was the only state with these forms of duty still in place was staggering.

We understand the need of government to raise revenue, however, these charges gave rise to a form of protectionism for Banks.

Bank facilities secured by mortgages over property or charges over business assets have been subject to duty payable at the rate of $4 per thousand of facility. From 1 July 2016 this duty will no longer be payable. Whilst the amount is not necessarily large relative to other costs it can represent the difference between what a new Bank is offering relative to the existing Bank.

It should also be remembered that these costs have been borne, in the main, by small and medium sized businesses. The larger the borrower the less likely that formal charges would be taken by the Bank.

Some Banks have recognised the barrier that this tax presents and have, on occasion, offered to pay, or partly pay these costs to entice a new client to make the switch. However, this only moved the obstacle from one organisation to another.

The abolition of the duty will remove this barrier and mean that an incumbent Bank needs to remain closer to its clients and more vigilant to ensure that competitors do not make inroads into their portfolio.

I predict that removal of this duty will increase movement between banks and make the environment more competitive for the benefit of the Bank customer.

At BRW Advisory we have run a number of Bank tender processes where mortgage stamp duty has been influential on the outcome and we welcome the change. If you would like to speak to us about running a competitive tender for your business please don’t hesitate to contact Alistair, Angelo or any of the BRW Advisory team for a confidential discussion on a ‘no obligation’ basis.