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: http://stampduty.