This tax exemption should be applied to downsizing retirees

The nitty gritty on tax, investment, and property.

When my daughter asked me recently whether she should invest in a positively geared rental property using the equity in her house we got down to discussing the costs and benefits – the nitty gritty.

One cost she had never heard of was stamp duty. She’d obviously paid it when she bought her current residential property, but had forgotten about it or wasn’t aware at the time, so we did some research to see how much she’d have to fork out to the government for allowing her to spend her money on a house.

In all states, it’s a hefty sum. For a Queensland example, consider this:

1. The median price for a house in Brisbane is $635,000
2. Stamp duty on that is $14,425 if it’s an existing property, it’s your primary residence, and you aren’t a first home buyer or foreign buyer
3. Add to that another $1676 for title deed transfer and $175 to register a mortgage (if you have one)

Now, if you buy an investment property and all of the other criteria are the same, the stamp duty goes to $21,600.

It’s probably fair to say that most of us, i.e., over 60s won’t be buying investment properties, however, if we decided to downsize and buy a smaller property, we would get slugged with stamp duty. Say you sold your Brisbane house for the median price of $635,000 and bought something else for say, $400,000. You would have to pay $5,250 plus transfer fees of $901.

You’d still have a few bucks left over to help fund your retirement, but it would piss me off to have to pay $6,000 of hard-earned money to the government to squander.

My daughter was a bit disheartened but realises that you have to spend money to make money. It got me thinking that if the government wants to encourage older Australians to downsize, it should waive the stamp duty costs.

Perhaps we should be lobbying the Federal Government to encourage State and Territory Governments to give retirees a stamp duty break when downsizing. What do you think? Would it encourage retirees to downsize and access the money tied up in their valuable properties? Will you write to your local Member of Parliament and suggest it?

Source for calculations:

  1. elena  

    Too late for me since I have already d/s and I had paid the stamp duty as I have always done when moving home. There is something that nobody talks about (or is aware of). I´m referring to R. E. commission rate which is unfair to charge there about or more than 5% on the sale price vs. 3% when properties where a quarter cheaper. This reason is, I believe, because there is too many of them and to make a living (or get millionaires in a short period of time) they have to charge this unreasonable amount which means a big slice of what I have worked very hard for (not sitting in a last model motorcar start of the art office etc. etc.) Where is the ACCC and what is it doing about this legalised theft? What our government thinks…well, small business generates tax for gob while big ones well, we all know about the subject. Both very much Government friendly!!!

  2. Mary  

    I have seen Purple Bricks R E ads (normally don’t believe advertisements) but they seem to be addressing the problem of commissions with one fee for all. As to the stamp duty problem – I believe the retirement villages that have 99 year lease arrangement do not have to charge stamp duty as do strata title villages. I know there are a lot of ongoing costs etc and should check this all out before moving into one – but with all the services it does seem to be one way to down size

    • Dex21  

      The ACT Government has waived stamp duty for over 60’s who downsize. This is a considerable saving and a way of encouraging people to downsize freeing up larger homes for families. I certainly appreciated it.

  3. Robin. Can you please tell me what sort of fees In Queensland are associated with transferring the family home of a now lawfully married couple from one owner to joint ownership?

    • Robin Henry  

      Hi Leone, I suggest you contact a Qld Titles Office where you live. The fees shouldn’t be too high because you are simply transferring title deeds. Your local solicitor could arrange it for you. Shouldn’t run into thousands.

  4. Wendy  

    The example above is wrong. In Queensland if you buy a house new or existing and it is your primary residence the stamp duty is 1%. How do I now this? I am in the process of buying a home in Queensland right now.

    • Robin Henry  

      I’d be very surprised if it is now one percent Wendy, but if that is the case, you’ve done very well.

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  5. Kezza  

    There are no insentives with this government or any other. I think to enocurage retirees or those over 60 wanting to invest to fund their own super funds, stamp duty should be abolished.
    There would no doubt have to be a means test.

  6. Carol  

    I live in Victoria and downsized about six years ago and paid no stamp duty at all. If you’re on a pension you can apply for an exemption…which is what I did.

    • John Liquorish  

      Yet another lurk I don’t get as I have a small Super.

    • Robin Henry  

      Wow, that’s very generous. If people are genuinely downsizing, I think it should be abolished and that only one opportunity ie, you couldn’t buy and sell several properties, should be exempt.

  7. Jean  

    WA have just announced that stamp duty up to $15,000 will be waived for properties up to $750k so says Col Barnett.

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