The latest Housing Industry Association (HIA)’s Stamp Duty Watch report (found at www.hia.com.au) shows stamp duty in Australia has doubled in the last 8 years.
Stamp duty is the tax paid on any property purchase. It is based on a proportion of a transaction’s value and in Australia, is charged on a sliding scale; property buyers pay a higher percentage as the property price increases.
HIA Senior Economist Shane Garret says Australian homebuyers paid out over $21 billion in stamp duty to state governments during the 2017/18 financial year – and the total cost of the tax is expected to get even bigger over the next few years.
Stamp duty is considered one of the biggest hindrances for first time homebuyers, which is why new legislation was introduced last year; stamp duty was abolished for first home buyers of existing and new properties costing up to $650,000, and they also benefit from concessions for properties of up to $800,000.
As an aside, stamp duty is thought to have originated in Spain back in the early 1600s. Historically it was levied on the majority of legal documents such as cheques, receipts, military commissions, marriage licences and land transactions. A physical stamp (a revenue stamp) had to be attached to or impressed upon the document (hence the name!) to denote that stamp duty had been paid before the document was legally effective.
This government revenue raiser caught on across Europe; according to Wikipedia, the Netherlands introduced it in the 1620s, France in 1651, Denmark in 1657, Prussia in 1682 and England in 1694. England used it as a way to raise revenue for the war with France!
Obviously, more modern versions of the tax no longer require an actual stamp.
Mr Garret believes state governments are more dependent on stamp duty than at any time in the last decade. In NSW alone, the state Government received a staggering $13.8 billion through stamp duty.
“The recent set of state Budgets envisage stamp duty revenues increasing by another 11 per cent over the next four years,” he says. “This will involve homebuyers’ having their pockets drained to the tune of $23.1 billion annually by 2021/22 through stamp duty.”
If Mr Garret’s predictions are correct, now might be the time to look into buying a property before costs increase!
He does go on to say housing affordability and the sustainability of government finances would both be winners if stamp duty was replaced by better revenue-raising designs and he feels Australian governments really need to tackle this issue once and for all.
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