Yahoo Finance New tax break offered to solve Baby Boomer housing issue in one state: 'Barrier'
Older Aussies could soon get a tax exemption if they want to downsize in Victoria as the state government mulls solutions to the housing crisis.
A proposal to give older Australians a tax break when moving later in life could help solve a major issue for Baby Boomers and ease the housing crisis in Victoria. Older Aussies have been accused of fuelling the housing crisis because they aren't downsizing and letting young families move in.
Yahoo Finance contributor David Koch said finding a new place to live later in life can be extremely burdensome, partly due to the costs associated with moving. But Victoria could soon reduce the financial pressure by giving a one-off tax exemption for Aussies wanting to do just that.
The Property Council believes homeowners over 60 could be encouraged to sell up through a stamp duty exemption when purchasing their final home.
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The council said it would alleviate housing shortages and support older owners to move into more suitable accommodation in a submission to Plan for Victoria.
The Council's Victorian executive director Cath Evans said older homeowners struggle to overcome the stamp duty "barrier" when downsizing.
"A focus on housing supply should not only incorporate the construction of new homes but the more efficient transaction of existing homes," she said.
Are you an older Aussie struggling to downsize? Email stew.perrie@yahooinc.com
"This will promote a more efficient housing market by aligning the interests of older homeowners with the needs of prospective first homebuyers."
Premier Jacinta Allan left the door open to the change as she revealed the government is preparing to unveil key policy changes to boost housing stock, on top of its plan to build 800,000 new homes under its Housing Statement.
"We're having a lot of discussions with the Property Council and other industry representatives about what more we can do," Allan said this week.
"We are looking at building on the [housing] reforms we have in place... that does include conversations with industry about how we continue to partner with them to build more homes."
The problem has also been recognised by the opposition, with Liberal leader John Pesutto saying his party is "looking at options for people who want to downsize".
'Do I stay or do I go?': The big Boomer question
While older Aussies have been facing calls to vacate their big family homes and find something smaller, there are others who say this also has a negative effect.
Former real estate agent Jack told Yahoo Finance that cashed-up Boomers have been coming to auctions with "millions" at the ready and are able to price out any first-home buyer wanting to get a foot on the property ladder.
"There's sort of been this idea that if the Boomers got out of their houses, it would be a lot easier for all of us, which, in reality, is not actually the case," he said.
"This downsizer might have just sold their four-bedroom home for $1.4 million. They've got a million dollars in cash to play with. For them to go and bid $750,000 for the final property that they're ever going to live in, it's absolutely nothing to them."
Digital Finance Analytics found earlier this year that only one in 10 older Aussies had plans to downsize.
While moving into something smaller can provide less maintenance and work, those resisting a smaller address said the price of the replacement home, the high cost (both financial and physical) of moving, and the fear of change, were the biggest barriers to selling up.
Kochie's call on Aussie empty nesters
Koch is sympathetic to Baby Boomers wanting to stay in the home where so many memories were made. But he said the upsides of moving definitely outweigh the downsides.
"Our big family homes are great when they are filled with family," he wrote for Yahoo Finance.
"But, when the kids and grandkids are grown up, they’re often not worth all the work. Imagine the time you’ll save not having to mow a huge lawn or clean four bedrooms."
The Compare the Market economic director added leaving the decision to downsize too late "can be disastrous" because the burden on your loved ones "could be enormous" if you can't live on your own.
Kochie added that it could help you top up a tax-free income stream.
"Downsizers can make a contribution of up to $300,000 into their super when they downsize their home. It’s a great boost, especially if you’re over the age threshold for making voluntary contributions," he said.
- with AAP
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