Yet another key housing body has called for stamp duty to be either reformed or removed.
According to a new research paper by the National Housing Finance and Investment Corporation (NHFIC)1, removing stamp duty would “increase housing mobility, lead to more efficient use of the nation’s housing stock, and reduce state and territory revenue volatility”.
The report, Stamp Duty Reform: Benefits and Challenges, follows calls from other major bodies like the Housing Industry Association (HIA) to abolish the property buying tax2, while the New South Wales State Government is currently undertaking a review on whether it should replace stamp duty with a land tax3.
NHFIC’s report said a land tax on the value of the land and property would be a better alternative than stamp duty paid on each house purchase, as home buyers that have moved four times in the past 20 years are paying 10 times as much for stamp duty than a household making just one purchase at the start of this period, based on Sydney’s median house price.
Australian properties are 40% more sensitive to duty than many European OECD countries, and NHFIC found Victoria has the largest effective rate of stamp duty, while the ACT, which has had a transition to a broad-based land tax for the last decade.
“Families across all states and territories, except the ACT, are paying substantially more stamp duty when they move house than they were 20 years ago which is hindering mobility and the efficient use of the housing stock”, the report said.
“The typical household across all states (except the ACT) would be better off paying land tax on a median property than transfer duty.
“For example, a household in NSW would have to pay a broad-based land tax for more than fourteen years to be worse off, which is greater than the 12.4-year average holding period of a property.”
Significant house price increases4 in recent years has seen stamp duty revenues rise as high as $9.38 billion in NSW for the 2020-21 financial year, up from just under $7 billion the year before.
“Encouraging more household mobility through reductions in stamp duty leads to more efficient use of the housing stock which means people can better ‘right-size’ their own housing arrangements in line with their individual preferences,” NHFIC CEO Nathan Dal Bon said.
“Households that are considering downsizing and upsizing, or just seeking more space when they are working at home during COVID-19 wouldn’t be penalised under a broad-based land tax compared with the current stamp duty arrangements across most states.”
NHFIC’s report identified some key ways the transition away from stamp duty could be made, rather than simply ending it straight away:
- have a shorter period of five years, rather than longer (20), which would minimise any short-term house price increases
- credit back any households that have recently paid stamp duty
- allow cash-poor but asset-rich retirees to defer some or all of their stamp duty until they sell their property
- pay retirees and low-income earners a rebate on their land tax liability
- make it unlawful for landlords to pass on the cost of any replacement tax to their tenants
How much does stamp duty cost?
Stamp duty has been an unpopular home buying cost for some time, with the upfront cost preventing many a-buyer from entering the market.
Research in 2020 from the Urban Development Institute of Australia (UDIA) found that in Victoria, home buyers are handing up to a third or more of the purchase price of a new home to the state government5.
Since it usually needs to be paid upfront, more research from Gateway Bank revealed over 60% of first home buyers would’ve been able to buy a home sooner if they didn’t have to pay it6.
It’s not difficult to see why: for a non-first home buyer in NSW buying a $500,000 home, stamp duty could set them back nearly $18,000.
Stamp duty is generally calculated based on set rates for different price thresholds, which are different in each state and territory.
Using the national median value in each capital city7, buyers could expect to pay the following for stamp duty alone:
|Capital city||Median price||Stamp duty cost|
|Calculations via Compare the Market’s stamp duty calculator. Assumes a non-first home buyer buying a primary, established residence as an Australian citizen. Rounded to the nearest dollar, excludes other government fees.|
Stamp duty is still very much a reality for many Australian homebuyers, and these figures above don’t even factor in other major costs like Lenders Mortgage Insurance (LMI), conveyancing fees, registration fees and more.
- National Housing Finance and Investment Corporation (NHFIC). Stamp Duty Reform: Benefits and Challenges. 20 July 2021.
- Housing Industry Association (HIA). Stamp Duty Abolition: The End Justifies the Means, 19 March 2021. Accessed 20 July 2021.
- NSW Government, NSW property tax proposal, June 2021. Accessed July 2021.
- CoreLogic, Australian dwelling values finish the financial year 13.5% higher, but a loss of momentum is clear, 1 July 2021. Accessed 20 July 2021.
- Urban Development Institute of Australia, 15 September 2020. Pre-budget Submission 2020-2021. Accessed 20 July 2021.
- Gateway Bank survey, 18 November 2020. Accessed 20 July 2021.
- CoreLogic Home Property Value Index – 30 June 2021. Accessed 20 July 2021.