Stamp duty: The cash cow that is only getting fatter

By Ryan Grice

Median house prices in Australian capital cities have skyrocketed over the last 20 years, more than quadrupling in some places.

On the low end, prices have risen 182% in Darwin to a staggering 387% in Hobart. While sky-high prices are a hot topic across every newsroom in the country, one alarming detail has been swept under the rug: the nearly $60 billion in additional revenue it has made state governments.

The revenue jackpot is the result of state governments neglecting to update the brackets of their respective stamp duty schedules on a regular basis, leaving homebuyers paying larger stamp duty bills as a direct result of having to spend up big for a house. Stamp duty, also known as transfer duty is a “transaction tax” imposed by all Australian states and territories on property purchases. Rising house prices has led to a relative increase of effective rates of stamp duty of up to 185%. There have been even higher jumps in actual stamp duty paid; the duty based on the median house price in Melbourne went from approximately $10k in 2002 to over $44k in 2021.

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New South Wales is proposing a switch to a land tax alternative—a transition the ACT is already in the process of making—however, that too could harbour drawbacks. A complete lack of upfront costs could cause the floodgates of property speculation to open even wider. Additionally, it would only take an average of 14 years of land taxes at the proposed rates to exceed the value of the current excessive stamp duty payments.

Though the revenue from stamp duty is generally quite volatile, there exists no immediately visible alternative through the state governments’ tunnel vision and thus no incentive for change. Stamp duty bracket creep is distorting the housing market, hindering mobility (and thus labour productivity), and costing taxpayers money. This issue needs to be addressed and remedied so everyday Australians don’t end up getting priced out of the housing market or paying even more money just to have a place to call home.

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