ACT to lead federal budget downsizing seniors home scheme given stamp duty concession availability

The federal budget has introduced a $112 million scheme to help seniors downsize but commentators have noted it doesn't address state government-imposed stamp duty requirements.

Stamp duty costs are one of the biggest impediments to retirees looking to downsize, advocates for change have said in many submissions over the years.

National Seniors chief executive Michael O’Neill says he cautiously welcomes the scheme but says stamp duty remains a hindrance.

"Any innovative attempts to alleviate the everyday living pressures on Australia’s so-called asset-rich, income-poor retirees without penalty are welcome," he said.

"However, rather than the pension assets test, National Seniors research indicates that it’s stamp duty that acts as a disincentive to downsizing.

"After doing the sums, elderly Australians with stairs and big gardens often find they simply can't afford to downsize after being slapped with state taxes and agent fees."

The Combined Pensioners and Superannuants Association of NSW’s reaction to the budget said the scheme was unlikely to work as stamp duty still acts as a major disincentive to downsizing.

Certain states do allow for some stamp duty concessions for seniors and pensioners.

The Pensioner Duty Concession Scheme in the ACT assists eligible pensioners downsizing by charging stamp duty at a concessional rate of $20 if the property is worth less than $412,000. To receive the pension applicants must be at least 64.

In 2008, when the scheme was introduced, Chief Minister Jon Stanhope said the step would address housing affordability.

“This will help free up larger homes for younger families, while easing the burden of looking after a larger home for elderly Canberrans who live alone,” he said at the time.

Following the ACT's introduction of the scheme, the select committee on housing affordability in Australia recommended that all state and territory governments consider stamp duty exemptions for first-home buyers and for retirees who are downsizing their primary residence.

It said stamp duty “discourages people from moving to more appropriate housing types as their circumstances change.”

In 2010 the NSW government introduced a stamp duty concession for seniors buying newly built or off-the-plan accommodation, but that ended in July 2012.

NSW currently has a non-targeted new home bonus of $5000 for anyone buying a newly built home or vacant land.

In Victoria, card-holding seniors are eligible for a stamp duty exemption for properties under $330,000 and then a sliding scale discount for properties up to $750,000.

And in the Northern Territory the Northern Territory Pensioner and Carer Concession Scheme allows for an $8500 concession for homes under $750,000.

The Northern Territory also has the Principal Place of Residence Rebate which is non-means-tested $3500 rebate for those who have previously owned a home in Australia to acquire another home, or land on which it is intended to build a home.

In May 2012 the managing director for residential of Colliers International, Peter Chittenden called for major changes to stamp duty.

“Stamp duty concessions for older people downsizing would see more homes in established areas released onto the market and this would also have the impact of better utilising of existing infrastructure, as many of these homes would be in established areas,” he wrote.

The Real Estate Institute of Australia maintains that stamp duty is one of the major impediments stopping people downsizing.

REIA’s Evgeniya Hawthorne wrote about the issue in September last year.

“Stamp duty is the largest cost impediment to downsizing. Appropriate policy needs to be developed to encourage more efficient allocation and utilisation of the nation’s housing stock,” she said.

In February National Seniors Australia called for stamp duty relief in WA ahead of the state election there.

In its WA budget submission, National Seniors recommended the incoming government introduce stamp duty concessions for older West Australians who want to downsize.

“Older West Australians feel they have not shared in stamp duty relief in recent years, which has primarily targeted businesses and first home buyers,” National Seniors' June MacDonald said.

The ABC’s Michael Janda wrote in February that there is a general consensus among economists that “the archaic tax” should be relegated to history.

The three year trial will commence on July 1, 2014 where senior Australian homeowners who downsize when buying another home will have an option to invest at least 80 per cent of surplus funds remaining (up to a cap of $200,000) in a special account. The funds invested in the account would be exempt from the age pension means test for up to 10 years. The scheme would only be available to Australians over age pension age who have owned their home for at least 25 years.