Stamp Duty vs Land Tax

While its easy to say taxes are bad, they are an absolute necessity if we would like to keep the lights on, hospitals open, schools running and every other service we take for granted operating.

I had an interesting conversation a week ago with an older gentleman that had been dealing with property for a long time. “You know what I hate?” he says (loaded question here but I took the bait). “yes?” I ventured, “Stamp duty!” It’s a killer with property!” Well, no arguments from me there.


Stamp duty is a State Tax levied on the purchase of property (and a lot of other things, but property tends to hurt the most), paid to the government on top of your purchase price. First Home Buyers are entitled to a concession that can effectively bring this down to zero as a once off, but for everyone else its one of those unavoidable costs to putting a roof over your head or investing in a roof over someone else’s.


Stamp duty affects people differently on the circumstances but lets try a few examples. A couple are upgrading from a unit they have just sold and are now purchasing an existing 4 bedroom house for $500,000. That will be $8,750. Staying in the unit and buying the house as an investment? The grand sum of $15,925 thank you very much.


While its easy to say taxes are bad, they are an absolute necessity if we would like to keep the lights on, hospitals open, schools running and every other service we take for granted operating. The argument against stamp duty though is not that its bad because it’s a tax, but because its not particularly efficient.


Stamp duty is only paid when a property transacts, and is a percentage of property value, so the revenue received can go up and down with both sale volumes and prices – not particularly helpful when forecasting State budgets. And as our gentleman intimated – it can also restrict the free flow of the market as people become reluctant to move due to the added costs.


An alternative being touted now is a broadly based land tax, payable over time like rates and calculated on a similar basis. It removes the need to save up an additional lump sum, makes it much easier to move up and down (or sideways) between properties as it suits you, and could encourage downsizers to free up more family sized homes as well. Some States are trialling an “opt-in” system, where you choose whether to pay stamp duty or swap over to the new method. Is one better than the other? Time will tell!