September 1, 2020


Accrue Real Estate


Claire Hielscher

aerial view of houses near the bay

Should we get rid of stamp duty?

Stamp duty reform is back on the agenda. From the Reserve Bank of Australia (RBA) through to current Federal Treasurer Josh Frydenberg, everyone seems to be talking about the issue. For decades many tax experts, economists and state politicians have been urging governments to reconsider their position on stamp duty.

But what exactly is stamp duty, and why should it be reformed? This article looks at stamp duty in detail and examines why many proponents are pushing for it to be reformed as part of a COVID-19 recovery economy.

What is stamp duty?

In short, stamp duty is tax that state or territory governments charge for certain transactions. It is levied on a number of purchases, including when buying a home or investment property.

Stamp duty can be one of the largest expenses when buying a property and is usually paid within 30 days of settlement.

How does stamp duty work?

The amount of stamp duty you’ll need to pay when purchasing a property will depend on a number of factors. Some of these include:

  • Where the property is – While stamp duty applies in all states and territories throughout Australia, each have their own fee structure and schedule. You’ll need to check with your local revenue office to find the fee structure that applies to you.
  • The value of the property – Stamp duty is calculated on the purchase price of the final sale. The higher the property price tag, the larger the stamp duty.
  • Whether you’re an owner-occupier or invested – Some states and territories calculate stamp duty differently depending on if you intend to live in the purchased property or not. For example, South Australia charges the same amount of stamp duty whether the property is owner-occupier or an investment. Whereas Victorian property investors will need to pay a higher percentage of stamp duty than owner-occupiers.
  • Whether you’re buying an established home, a new home or a block of land – Different property types attract different levels of stamp duty.

All stamp duty has to go to your state revenue office before lodging of the transfer of land to the land titles office. More often than not, your conveyancer or solicitor will arrange to pay stamp duty on your behalf to the relevant government body.

Is anyone exempt from paying stamp duty?

Most state governments waive stamp duty if you’re buying your first home and are eligible for the First Home Owners Grant (FHOG). Other exemption and concessions apply in some other scenarios, including if:

  • You’re a pensioner
  • You run a farm
  • You’re buying off-the-plan
  • The property is a deceased estate.

These exemptions come with various terms and conditions depending on where you live and your individual circumstances. It’s best to check with your state revenue office to learn how they could affect you.

Reasons for stamp duty reform

Stamp duty represents a huge amount of income for state and territory governments. For example, pre-COVID, it was projected that stamp duty would generate $9.5 billion in revenue for Victoria in 2020. While it’s guaranteed income for governments, such a large upfront cost can be a major blocker for some buyers.

Many economists and tax experts think that stamp duty should be revisited, especially in the face of a very different economic landscape post-pandemic. And they have some compelling opinions and data to back up their reform arguments.

It could help to improve mobility

For RBA governor Philip Lowe, the question of whether to reform stamp duty has a lot to do with mobility.

“If we’re looking for an economy that’s dynamic and vibrant, we want to remove taxes on mobility,” Lowe explained. Greater ease of movement is definitely a tick in the pro-reform column, especially as more people consider where to move to for reliable work or a lower cost of living post-pandemic.

Reform may improve productivity

Being such a large tax, stamp duty is inherently a productivity inhibiting levy. For Professor Breuing, director of the Australian National University Tax and Transfer Policy Institute, “Stamp duty is the most inefficient of all the taxes in Australia, so it has the biggest economic costs,” he says.

In fact, the Grattan Institute estimates that removing stamp duty could boost overall economic productivity by $17 billion per year.

Stamp duty reform will make buying a property easier

Perhaps the largest positive for restructuring stamp duty is the effect it will have on home buyers. By staggering or reducing the initial stamp duty outlay, potential buyers can take more of the money they’ve put aside for stamp duty and put it in a down payment.

Extrapolating this eventually, Deloitte estimates that a complete abolition of stamp duties (that is, a 100 per cent reduction) would lead to an increase in property transactions of around 60 per cent.

Stay the course for long-term gain

The team at Accrue is across the important issues when it comes to getting the most out of your property purchase. While stamp duty reform may still be a way off, we’re here to help you buy property the smart way. Contact the Accrue property experts today to discuss your circumstances and home ownership goals.

Disclaimer: This is general advice and has been prepared without taking into account your particular situation or needs. You should consider whether it is appropriate for you before acting on it.