LJ Gilland Real Estate: Stamp duty reform is finally on the agenda and the latest idea involves giving future home buyers a choice.

Monday, June 22, 2020

Stamp duty reform is finally on the agenda and the latest idea involves giving future home buyers a choice.

You can pay an upfront lump sum of about $40,000 on a $1 million purchase (in NSW) or an annual land tax of around $3,000 for every year that you continue to live in the property.

This specific proposal is from the NSW Government, which is working with Victoria to push for stamp duty reform across the country to help the Australian economy recover from Covid-19.

I agree that a broader-based solution across the market might be a better way of doing things.

Stamp duty is now so absurdly high that it disincentivises moving and punishes those that do.

Most buyers have to factor the cost of stamp duty into their borrowings, which means they not only pay this ridiculously expensive tax every time they move, they also pay interest on it.

In a robust economy, people need to be able to relocate easily to be closer to a new job or school, or to upsize or downsize as per their life circumstances.

We’ve seen the stimulatory effect of removing or reducing stamp duty with first home buyers so we know it works.

I hope it happens sooner rather than later but for now, stamp duty reform is just an idea.

The Federal Government has asked all the states and territories for tax reform proposals to help in the economic recovery but it will take time for any changes to become reality.

Meantime, the HomeBuilder scheme has sparked massive new interest in building new homes and that’s great for our economy.

Developers and agents are reporting a lot of enquiry about the $25,000 grant.

The first thing you need to know is that HomeBuilder is a short term program, so you need to move quickly if you want it.

Your new build or major renovation contract has to be signed by December 31, which doesn’t leave much time for people who need council approval to go ahead with their plans.

Here’s a quick re-cap on eligibility for HomeBuilder:

Owner-occupiers can use the grant to build a new home worth up to $750,000 or undertake a substantial renovation worth a minimum $150,000 up to $750,000
The pre-renovation value of your home must be less than $1.5 million
Separate structures like pools, tennis courts and sheds are excluded
There are income caps of $125,000 for singles and $200,000 for couples
First home buyers can use HomeBuilder in combination with a First Home Owner Grant, stamp duty concessions and the First Home Loan Deposit Scheme

The minimum renovation spend of $150,000 rules out small jobs like new bathrooms and kitchens; and the $1.5 million value cap excludes many owners in inner Sydney and Melbourne.

Just like JobKeeper, this is a targeted measure and some people are going to miss out.

If you do, re-direct your focus to interest rates and the incredibly low home loan deals on offer today.

They recently dropped even lower into the very early 2 per cent range, and with cashbacks of up to $2,000 being offered by lenders to help you refinance, a home loan health check is well worth your time.

There are some incredible deals available.

If you’re not taking advantage of them, you might be missing out on far more savings than you might get with HomeBuilder or JobKeeper.