Recently, I voiced my opinion on a plan to tax profits on the sale of family homes worth over $2 million, saying it could be the ‘thin edge of the wedge’.
Today’s $1 million properties are the future’s $2 million properties so while the proposal may seem unlikely to affect “average” Australians now, it certainly has the potential to affect many Australians in Sydney and Melbourne.
It should be remembered that Sydney currently has 302 suburbs where houses and apartments have a median price of $1 million. That’s double what it was five years ago. In Melbourne today, one in five suburbs have a median price of $1 million.
While such a tax might reduce pressure on the Government to increase the GST, it could affect Australians in unexpected ways.
People buying homes as a principal place of residence, but planning to live in and renovate for speculative purposes – such as an old $2 million property that could be re-purposed into two more affordable residences – could be driven to buy well under the $2 million threshold, thereby increasing competition and the level of difficulty for buyers in those price ranges.
Secondly, first home buyers anticipating the sale of a parent’s property would assist them to break into the property market may find themselves, and their siblings, subject to a government tax-grab on the proceeds of the sale of the original family home, substantially reducing their share upon distribution.
The government already adds substantially to the purchase cost of a family home through stamp duties that were supposed to be removed when the GST was introduced. Now it wants to add a new tax to the sale of the family home, which could immediately affect the market in more affordable price ranges.read more