The dreaded and controversial stamp duty tax could soon be a thing of the past, with calls for it to be abolished gaining momentum.
The Property Council of Australia is the latest body to add their voice to the chorus this month after both the NSW and Victorian state governments ramped up calls for stamp duty reform.
Axing the controversial tax is a key measure being proposed in the Property Council’s Seven Point Plan for Economic Recovery, released this week, to help kickstart economic recovery across the nation.
“Stamp duty is a terrible tax,” the Property Council’s chief executive Ken Morrison recently explained to the AFR, “every economic analysis puts it at the top of their list of worst taxes. For every $1 raised it does about 80c of harm.”
What is stamp duty, and how much does it cost?
Stamp duty is a government tax on certain transactions, including when you buy a motor vehicle, an insurance policy, or for this article: a piece of real estate.
In a nutshell, state treasurers and many economists want reform in this space because stamp duty is volatile – it rises during property booms and shrinks during downturns.
Now, how much it costs will depend on where you live, and the value of the property you’re buying.
Most states have stamp duty exemptions or concessions in place for first home buyers, but that doesn’t help out those looking to expand their property portfolio.
The tax also acts as a barrier to older Australians who want to downsize and unlock their wealth.
So how much does stamp duty usually cost? Well, as luck would have it, Domain just released a summary of the stamp duty costs for median-priced homes in each capital city:
Sydney: $49,586 (house) or $28,942 (unit)
Melbourne: $50,171 (house) or $28,328 (unit)
Hobart: $18,847 (house) or $15,351 (unit)
Adelaide: $23,663 (house) or $12,522 (unit)
Perth: $19,063 (house) or $10,679 (unit)
Canberra: $23,914 (house) or $9396 (unit)
Brisbane: $12,165 (house) or $4342 (unit)
Darwin: $4,868 (house) or $0 (unit)
Those figures are for non-first-home buyers who are purchasing established properties.
So what would replace stamp duty?
The NSW government is considering a broad-based property tax (aka land tax).
Victorian Treasurer Tim Pallas meanwhile, says a review of the state’s revenue base after the COVID-19 pandemic is needed, but he’s not sure that switching from stamp duty to land tax is the way to go.
“It’s a bit like a Mills & Boon novel: it might be satisfying and uplifting to read, but getting to that point without causing major trauma to the community is a very serious consideration,” he said.
Another option being floated by the Property Council is to replace stamp duty revenue by broadening the GST base.
What to do in the meantime?
As mentioned earlier in the article, most states and territories already have certain exemptions and concessions that apply when it comes to stamp duty, particularly for first home buyers.
Generally, it depends on the price of the property you have purchased, or if it was off-the-plan, as to whether you’ll be eligible.
And obviously, the less stamp duty you pay, the more of your hard-earned money you can put towards your home loan deposit.
So if you’d like a hand figuring it all out please get in touch – we’re happy to help you crunch the numbers.