Property & Home

The case for cutting stamp duty

Apr 14, 2017

Source: Stock

Stamp duty and the cost of downsizing have been at the forefront of talk about housing affordability in recent months.

Seniors groups and housing bodies have identified stamp duty as one of the biggest disincentives stopping older Australians from downsizing, and they believe a reduction in stamp duty could help ease the housing affordability crisis.

While cutting stamp duty has been brought up numerous times over the year, the campaign against it has ramped up during recent discussions about housing affordability.

Among those advocating for a cut to stamp duty is the Property Council of Australia.

The PCA argues that stamp duty is creating “a major impediment to housing affordability”, with the cost now as high as $75,000 for the average home in Sydney.

Chief executive Ken Morrison said when you add removalist costs, bank fees, conveyancing fees and real estate commissions to stamp duty, the cost of downsizing was “substantial”.

“It’s another reason we have an issue in our major cities with housing affordability,” he said.

“If the state governments are serious about housing affordability they can start with stamp duty and planning system reform.”

According to figures from the PCA, the average cost of stamp duty across Australia has increased over the years – now costing (approximately):

$38,000 in Melbourne
$25,000 in Darwin
$21,000 in Canberra
$18,000 in Perth and Adelaide
$16,000 in Brisbane
$13,000 in Hobart

The PCA points to research from Deloitte Access Economics, that shows if stamp duty was dropped, an extra 34,000 properties would be sold each year.

Seniors groups such as National Seniors Australia have also joined calls for stamp duty to be dropped.

For National Seniors, changes to stamp duty have been on the radar for many years.

Back in 2014, the organisation made a submission to the Inquiry on Affordable Housing, calling for stamp duty concessions for seniors.

“National Seniors members indicate that stamp duty charges discourage them from moving to more appropriate housing as their circumstances change,” the submission read.

“While an important source of revenue for states and territories, it distorts housing choices and acts as a barrier to downsizing among older Australians.

“We therefore recommend that the Commonwealth, State and Territory governments work together to provide nationally consistent responses to improve affordable housing supply in well-serviced areas and stamp duty concessions for seniors who wish to downsize and release older stock.”

National Seniors chief advocate Ian Henschke told Starts at 60 that it was pleasing to see some state governments looking at reducing or capping stamp duty.

“We would be asking the state governments to assist pensioners to rightsize by giving them assistance to sell without paying stamp duty on their properties,” he said.

Victoria is one of the states that has taken some initiative in reducing stamp duty, although the government there is only waiving stamp duty for first home buyers on properties worth up to $600,000.

So, you’ve heard some of the arguments for why people want stamp duty to be cut.

But will it ever happen?

Well, as Starts at 60 reported last month, the Federal Government asked the Parliamentary Budget Committee to cost a cut to stamp duty.

Because stamp duty is a major source of revenue, the Federal Government found it would need to give an $850 million loan to the state governments.

According to the Grattan Institute’s John Daley, cutting stamp duty would help older Australians downsize.

“They know that if they move from property one to property two then their net wealth will reduce because they will still have to pay the stamp duty,” he told the ABC’s AM program in March.

But Treasurer Scott Morrison isn’t as convinced.

He told Radio 2GB last month that cutting stamp duty could end up pushing up house prices.

“On the issue of stamp duty, I welcome it but at the end of the day if that just means that people just bid up more at the auction because they can borrow more because they don’t have to pay stamp duty, obviously, that will just take prices in one direction,” he said.