You will remember stamp duty as one of those pesky anti-activity state taxes that was to be abolished with the introduction of the GST more than a decade ago. The states couldn’t let go of the windfall tax that nets so many thousands of dollars every times a house changes hands and, best laid plans aside, stamp duty stayed.
Finally in 2012 the ACT government took the lead and set about abolishing the tax that provides such a disincentive to sell your home and buy another one. Not quickly; nowhere near it. Stamp duty is being abolished over as many as 20 years, little by little, with a smiles-all-round announcement each budget for a different sector of the home-buying public.
This year, it’s the 60-pluses, those baby boomers with the free university education and the heady days of generous superannuation and social welfare already under their belts. Now, they can move out of the family home and buy a new house without having to hand over a whack of transaction money to the government. Which, despite, the resentment you may feel towards the baby boomers, is a sensible thing if you want to encourage more activity in the housing market. These are people ready to move.
The baby boomer bonus comes on top of the already programmed cuts to stamp duty as part of the 20-year phase-out, which will see the tax for other house purchases cut by $1300 for houses costing $500,000 or more.
It’s still a big hit, though, for many people trying to buy a house. You’ll pay $15,800 in stamp duty for a $500,000 house and $28,300 for a $750,000 house.
But the real sting in the tail is the hike in rates that goes hand in hand with the cuts to stamp duty. The phasing out of stamp duty is being funded through rates, and this year rates have been forecast to rise by 10 per cent across the board. That’s in the forward estimates, and the government won’t say till Tuesday just how much rates will rise and who will be the winners and losers in this equation.
But just as the cuts to stamp duty are progressive over many years, so too are the increases to rates. While stamp duty gradually decreases – by small amounts for many homebuyers – rates will inexorably increase year on year for every home owner.
Property is at the cornerstone of a large part of the government’s revenue decisions, since it has so few ways to make money. Rates, stamp duty and land tax make up half its tax revenue.
And as well as stimulating the domestic market and hurrying on home owners to sell, sell, sell, Treasurer Andrew Barr has his own property-led solution for the teary economic times we face. He is looking to encourage big commercial investment from the private sector, while also embarking on a program of selling government buildings and investing in new development.
So as you turn 60 and take that life-changing step to put the family home on the market, know your government is taking a few brave steps of its own and brace for big borrowing, big spending, new buildings and grand projects.