What is the real cost of stamp duty?
Buying a home is an expensive undertaking before the removalist truck has even arrived, especially when you take all the extra bills, home loan application fees and stamp duty into consideration.
Research from the Housing Industry Association (HIA) showed the typical home buyer in Victoria is hit with a $24,100 stamp duty bill (the highest in the country), almost $20,000 in New South Wales and Western Australia and in all but two of the eight jurisdictions at least $15,000 on the median-priced home.
HIA senior economist Shane Garrett said the burden of stamp duty is significant in all states and territories with the exception of Queensland where the tax adds at least 3.0% to the cost of the dwelling.
“This form of taxation makes household indebtedness worse by increasing required borrowings. Stamp duty results in total mortgage repayments increasing by $46,400 in Victoria and by $37,100 in NSW. In WA, additional mortgage repayments will total $33,800.”
While stamp duty is generally out of your hands, you can save in other areas of homeownership, including the cost of your home loan. By simply comparing the home loan market and signing up with a low rate home loan, you could potentially cut tens of thousands off the interest you’ll pay over the life of the loan. Use Mozo’s switch and save calculator to see how much you could save.
Garrett suggested a better alternative for stamp duty would be to have it placed in buyers’ superannuation funds, which would transform the financial well-being of today’s homebuyers on retirement and put less pressure on the public purse.
“For example, WA retirees would be better off to the tune of $234,000 and the typical NSW pension fund would be effectively boosted by $256,600. In Victoria, stamp duty has the effect of plundering up to $320,000 from the ordinary buyer’s retirement pot.”
Garrett advised stamp duty is an area ripe for policy reform and the report’s findings make this all the more apparent.