stamp duty



Housing affordability is often a topic of political discussion at state and federal level. One of the key components that limit the ability of an individual or a family to buy a money for stamp dutyhome is stamp duty that is charged when buying land to build on or an established home.

According to Landgate/REIWA, the median house price in Perth in June 2015 was $540,000. According to REIWA’s Stamp Duty Calculator if you are buying a property at that price you will then be hit with stamp duty of almost $20,000. All of Australia’s States and Territories charge Stamp Duty on property transfers.

But why? Why do we pay stamp duty on land transfers?

Well, the aim of it is to cover the cost of legal documents for the transaction.

Is that what it does?

Well, no…according to some experts, at least. The 2010 Henry Tax review by (then) Treasury Secretary Ken Henry gave a damning review of stamp duty on stamp duties. In his report he stated that “stamp duties are a highly inefficient tax on land1”. Miranda Stewart, Professor and Director of Tax Studies at the University of Melbourne, believes that stamp duty is volatile and inefficient, feeds into house prices which contributes to lack of affordability and taxes much more heavily those who purchase new housing more often2.

So, why don’t state governments reform stamp duty? Or get rid of it altogether?

Well, governments just like it too much.

Despite all the detrimental reviews of stamp duty that one might give, it does raise a lot of money for governments to play with, especially in times of a housing boom. Member of NSW state cabinet Pru Goward, who has previously been responsible for NSW Housing, put this into perfect perspective when she said “We have a housing boom that of course is generating tremendous stamp duty revenue, so our revenue is back in the black and that has enabled us to make spending commitments that we otherwise would not be able to do3”.

And what sort of government would want to change that?

Well, a forward-thinking one would, of course!

Ken Henry recommended that in his Henry Review. He said that stamp duty should be replaced by expanding broad-based taxes such as consumption tax or land taxes. CPA Australia has made similar arguments when discussing tax reform4.

Or something really forward-thinking, like getting rid of stamp duty and replacing it with a requirement for homes to implement rain and grey-water systems. Perth Metropolitan dam levels continue to decline year after year. At the time I am writing this they are full to only 29% capacity. That is terribly low after any winter and this coming summer will only see that capacity fall and fall.grey water system

The WA Government spent $387m almost 10 years ago to build a desalination plant which now supplies 17% of Perth’s water5. How likely is it that another will be required if Perth’s population continues to grow and less rain comes into our dams?

I would be very impressed if we had a state government that was able to anticipate a problem and implement preventative policies rather than waiting until the problem arises only to then seek curative measures. A policy such at this might solve two issues at once and lead to WA becoming a hub for innovation in rain and grey-water systems. Homeowners would benefit from future savings of water costs.

I think that home-buyers would be more open to having to spend money on something that they can see the benefit of, rather than being taxed thousands of dollars by having to pay stamp duty.

In any case, what we really need is some real leadership from our policy-makers at state and federal level. Experts like Ken Henry have published their arguments only for Prime Minister Rudd and Treasurer Swan, and those who have followed, to do little after it. It’s up to the politicians we elect to have the courage to implement the changes that will benefit the population rather than carrying on as we are out of a fear that trying to change things will lead to a backlash that will result in unfavourable polls. We need politicians that look beyond the next election.


Daniel Causerano

Snr Accountant – OPTIMA PARTNERS







Rate this post

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.