16 February 2018

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

| Ian Bushnell
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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
“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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Capital Retro3:22 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?

Capital Retro10:20 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.

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 Retro11:53 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.

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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