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Chief Minister calls for national abolition of stamp duty for first home buyers

By Ian Bushnell 18 February 2018 27
buildings.

Stamped out: The Chief Minister proposes to do away with stamp duty for first home buyers.

Chief Minister Andrew Barr has called for the national abolition of stamp duty in exchange for the scrapping of First Home Owner Grants as a way to make housing more affordable.

Mr Barr, who will take the proposal to the next meeting of State and Territory Treasurers, said stamp duty was an inefficient tax and the First Home Owner Grants were counterproductive, only serving to drive up house prices.

“Every economist in the country agrees that stamp duty is an inefficient tax, and one that puts another hurdle in front of first home buyers by forcing them to either borrow or save tens of thousands of dollars on top of the cost of housing,” Mr Barr said.

He said that while most jurisdictions had concession or exemption schemes – including the ACT – the eligibility thresholds often lagged behind the real price of a home in today’s markets.

“State and Territory Governments can cut this entirely in a fiscally sustainable way by removing the First Home owner Grants at the same time,” he said.

These grants no longer serve the purpose for which they were created – and arguably make housing less affordable.

They fuel price growth by adding many times their dollar value to the borrowing power of purchasers, and distort decisions about where and what property people buy – channeling demand into particular segments of the market, driving up prices further.”

Mr Barr believes that this approach would deliver far more effective support to those trying to buy their first home.

This week he foreshadowed further stamp duty cuts as part of the ACT’s tax reform process, which seeks to eventually replace stamp duty with broad-based land taxes.

“We are prepared to do this in the ACT by accelerating the removal of stamp duty specifically for first homebuyers ahead of our broader phase out. I will be putting this on the agenda for discussion at the next meeting of State and Territory Treasurers to ask my colleagues to do the same,” he said.

Master Builders ACT Chief Executive Officer Michael Hopkins welcomed the Chief Minister’s proposal  to accelerate the removal of stamp duty specifically for first home buyers ahead of the broader phase out.

 “Master Builders ACT wants to keep home ownership within the reach of all Canberrans. First home buyers, particularly young couples and families, feel locked out of the ACT market and measures such as stamp duty concessions can assist them,” Mr Hopkins said.

 “The housing data shows that the states that provide greater stamp duty relief for first home buyers also have a much greater share of first home buyers in the market.”

 He urged the ACT Government to consider stamp duty reforms together with the impact of the recent $30,000 increase to the Lease Variation Charge (LVC), increases in rates and other hidden charges that impact housing affordability.

The Housing Industry Association said stamp duty was a bad, inefficient  tax.

“Stamp duty is an inefficient tax that stifles building activity, and is one of the big impediments for first home buyers,” said HIA Executive Director ACT and Southern NSW, Greg Weller
said.
“It restricts the movement of people, whether to find work in other cities or to downsize, and it adds to the difficulty of buying a house for prospective first home owners.”

But Mr Wellers urged caution about the Chief Minister’s call to abolish the First Home Owner Grant as well.

“The First Home Owner Grant is for new homes only and makes it easier to buy a dwelling, drives building activity, and strengthens the financial position of first home buyers choosing to build,” he said.
“If this did occur, it could be expected that the removal of the grant would be immediate, whereas the phase out of stamp duty is a transitional process that is occurring across a number of years. It is not inconceivable that a future government could choose to walk away stamp duty reform, yet it would be highly unlikely that a grant for first home buyers would be reintroduced.

“And as bad as stamp duty is, it is by no means the only driver of affordability problems in the ACT. Land supply and the cavalcade of taxes on home building, such as the recent Lease Variation Charge increase, need urgent attention first before considering removing the grant.”


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Chief Minister calls for national abolition of stamp duty for first home buyers
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Capital Retro 3:22 pm 19 Feb 18

I think Warwick Alsop has put forward the best comment yet. How about abolishing stamp duty for owner/occupiers and leaving it payable and non-tax deductible for investors?

Warwick Alsop 1:11 pm 19 Feb 18

The argument that making property cheaper for a segment is inflationary one way, but not the other is farcicals. If you increase demand you increase prices. Simple as that.

They have to focus on reducing investor demand.

Tony Wright 8:21 am 19 Feb 18

Just stop people tax deducting property losses against personal income. It should only be tax deducted against other property gains. That's what they should start with.

Jenny Smits 7:50 am 19 Feb 18

Can he please do it by the 3rd of March?

    Jenny Smits 8:26 am 19 Feb 18

    He he no not yet but we’ve found one we both like going to auction 3rd March hence the need for action not words from our chief minister!

Capital Retro 10:20 pm 18 Feb 18

I am one of Barr’s “nostalgics” and I would like to see stamp duty stay, simply for the reason that I have already paid tens of thousands of dollars to ACT Revenue for the two houses I have purchased and occupied in Canberra in the past 40 years and I don’t see any reason why today’s home buyers should be given a free ride. I have never received any concessions like a FHOG either. I can’t even get a refund or a credit for recent garbage collections that didn’t happen because the $100k pa truck drivers didn’t turn up for work.

    mcs 9:34 am 19 Feb 18

    I understand where you are coming from, but I do understand how people get exceptionally frustrated by the ‘oh I don’t benefit so why should something change’ brigade – if we all thought like that, there’d be no public infrastructure ever built.

    I don’t think the transition has been undertaken well at all in the ACT (Frankly they should really have pushed for an increase in the GST rate, then used additional funding from that to pay for abolishing stamp duty than to dump it all onto rates – which is going to cause plenty of ongoing pain), but to think that such a change somehow gives people ‘a free ride’ is a long bow to draw, and to suggest such a change shouldn’t happen ‘because I won’t benefit’ is a short sighted view of the world.

    Capital Retro 11:53 am 19 Feb 18

    The GST was supposed to abolish state and territory stamp duties but the government at the time was forced to make compromises to get the bill through both houses.
    Those compromises gave a lot of people in the community a “free ride” too.
    Canberrans have the biggest “what’s in it for me” mentality in Australia so I am only conforming with what happens here.

Natalie Roseworn 5:26 pm 18 Feb 18

I do agree with it, just wish we (as first home buyers) hadn’t had to pay stamp duty less than 6 months ago!

Catherine Ford 5:22 pm 18 Feb 18

The ACT Government keeps housing prices high because it doesn't release sufficient land. Everyone's battling for limited resources and the apartments that are flooding the market aren't suited to all needs.

Michael Ahern 1:42 pm 18 Feb 18

Stamp Duty is an ‘inefficient tax’ but the ACT Gov is happy to keep taking the 💰 from land sales on new housing developments while ignoring infrastructure requirements.

Peter Brassington 1:20 pm 18 Feb 18

Not one off Caroline, average length of home ownership is 7 years.

Caroline Whittaker 11:48 am 18 Feb 18

Stamp duty is a one off payment, but rates are an ongoing expense. Increasing rates on apartments is another way to generate revenue from first home owners, who will most likely buy an apartment.

    Rob Sanders 8:18 pm 18 Feb 18

    Peter Brassington it is a once off during ownership of a property. Rates are frequent. Rate increases are apparently frequent.

Donna Venables 11:33 am 18 Feb 18

We got the $7000 first home owner grant in 2002. We then gave back $7600 in stamp duty.

Robert Sirr 11:25 am 18 Feb 18

How can the labor force be mobile when it is so expensive to relocate bc of stamp duty

Jordon Morrissey 11:06 am 18 Feb 18

Yes great idea.

Wade Bermingham 10:58 am 18 Feb 18

I was under the impression that the first home owners grant was supposed to cover stamp duty but was progressively ruined in that aspect by price changes and policies

Alan James 9:46 am 18 Feb 18

Stamp Duty is a tax on consumption and follows the principles of GST. Increasing rate by several times the inflation rate is a tax on ownership making owning property in the ACT less attractive. It is already cheaper in Sydney in terms of Rates and Water rates.

    Justin Watson 5:02 pm 18 Feb 18

    Yeah if you enjoy a 1-2 hr commute each day. Rates in Sydney are much higher than Canberra in general, sure Western Sydney they are cheaper. Majority of economists agree abolishing Stamp duty and increasing rates is the most efficient and fairest way to go. Why should there be a tax on moving homes for people downsizing or upsizing as they need to, instead of people paying an amount for the size of land and the location they own the property? There are issues with cost of living of course, but this applies across everything and is mostly federal government policy making it more expensive for state governments as well as the people.

    Alan James 5:05 pm 18 Feb 18

    My Son lives in the Eastern Suburbs, his house is worth 4 times mine and he not only pays less rates, he actually has a council that keeps the place running smoothly. Water rates are half of the ACT rates.

    Justin Watson 8:59 pm 18 Feb 18

    All houses are worth more in Sydney in comparison to Canberra. The rates for places I've seen in Sydney make Canberrans look like a bunch of whingers. Eastern Suburbs is still a 30 minute commute to the city. I bet my rates in Tuggeranong are heaps cheaper and a 30 minute drive to the city.

    Alan James 9:13 pm 18 Feb 18

    Not everybody needs to work in the city. Rates at Coogee for 3 beds $2150 pa

    Craig Elliott 10:59 pm 18 Feb 18

    That's cheap...I pay $3000pa in Hackett...5km from Canberra CBD

    Alan James 8:26 am 19 Feb 18

    Mine is $2050 in Forde.

Carol Drayson 8:58 am 18 Feb 18

I no longer believe or rely on anything a career politician says until proven, because I believe that there is always something going on behind the scenes that we don't know about to flavor the policies or promises.

Garfield 8:06 am 18 Feb 18

I agree that stamp duty needs reform, but its total abolition won’t make homes more affordable in the long run. Investors will benefit even more than owner occupiers as they will have more capital and borrowing capacity and will be able to continue to outbid aspiring first home owners. The bottom line is that demand has been outstripping supply for a long time and stamp duty cuts in isolation will just transfer more wealth from government to existing property owners and developers. The reduction in stamp duty will mean higher taxes elsewhere or a reduction in government services. Barr’s vision for eventually replacing stamp duty with rates is a recipe to keep more people locked out of home ownership for life. The people hurt most by his policies are lower income workers, but they don’t seem to realise it yet. From where I sit, we need to keep stamp duty in place for investors and reduce it for owner occupiers, while having protections in place to prevent people from avoiding tax by living in a house for a short time and then renting it out when they move into another one. If anyone has heard Lib policy in this area that’s more recent than we’ll stop Barr’s policy I’d be interested to know. They hold themselves out as better managers of the economy, but the shadow treasury seems to have been a black hole for years now even though the leader has taken it over himself.

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