Last week we were given the news that NSW will begin indexing stamp duty brackets to inflation or CPI (the consumer price index) to make transactional costs “fairer” and combat bracket creep due to rising property prices.
Whilst indexing stamp duty makes sense, it’s also about 30 years too late. Buyers today are paying about 10 times what the previous generation paid in relative dollars.
This is the first change to stamp duty arrangements since 1986, when the median house price in Sydney was just $100,000. Today, we’re close to $1 million.
This state government and several before them haven’t moved on this issue for one reason only – stamp duty is simply a big revenue raiser.
Indexing the brackets is really just a token gesture. The immediate effect is a $500 saving and while something is better than nothing, it’s impact on everyday Australians ability to buy a home or move will be negligible.
There are many people out there living in unsuitable accommodation because they simply don’t have the budget to cover the huge stamp duty impost.
If you want to buy a fairly modest home within 20km of Sydney’s CBD you’re looking at between $900,000 and $1,200,000. That’s around $40,000 in stamp duty that is ripped up for nothing.
This is the main reason the big cities of Australia have become unaffordable for many. It’s not overseas buyers, as was suggested during the boom. It’s the cost of transferring from one home to the next.
Today, someone wanting to upgrade from a house worth $1,000,000 to one worth $1,250,000 will have to pay around $80,000 in stamp duty, selling and legal fees.
This has prevented many Australians from doing what prior generations have done, which is gradually improving their homes so at some point in the future, the family home becomes an additional superannuation asset for downsizers at a certain time in their life.
The average length of time that Australians stay put in their homes is consistently rising and stamp duty is a big factor in this. Many home owners reason that the cost of renovating and extending where they are now – if this is possible, is cheaper and more convenient than buying a new home.
Whilst I’m delighted to see some focus on the stamp duty issue, indexing the brackets to CPI is not going to shift the needle. It’s still way too high and needs to change.
If the Government is serious about making housing more affordable for everyone, it would abolish the tax and find a more affordable broad-based tax that would make it fairer for everyone.
The stamp duty brackets will change on 1 July 2019 and will be relevant to all purchases on or after that date.
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