Stamp Duty to Be Abolished

Experts, industry figures and politicians are asking questions about the suitability of stamp duty in a post-COVID-19 economy.

The pressing issue being that the revenue stamp duty generates depends on turnover in the property market, while at the same time it acts as a disincentive to change properties, impacting economic performance and government bottom lines.

Stamp duty is a centuries-old tax developed in Venice in the early 17th Century, before being revived across Europe and introduced in England in 1694. Australia has been using the bygone system to generate revenue for more than a century.

Historically, property transactions were officially stamped to show a duty had been paid before the documents became legally effective, you would purchase a stamp and that stamp would be affixed to the document, hence the name Stamp Duty.

These days, electronic form submission has made the physical stamp expendable, but the tradition offers governments the perfect opportunity to impose a tax. “In a world where we have electronic property records that can track property values across Australia, the benefit of a stamp duty becomes redundant”, according to Grattan Institute’s Household Finances Program Director, Brendan Coates.

State and local governments nationwide collected $18.8 billion in stamp duty revenue in 2018-19 financial year. This revenue pays for things like roads and hospitals and without it, major infrastructure projects would be undeliverable, according to realestate.com.au’s executive manager of economic research, Cameron Kusher.

“While data shows that revenue from stamp duty is significant, it also shows how unreliable it is as a revenue stream. Where the number of housing transactions and house prices decrease, it is only natural that revenue from stamp duty will also fall”, says Mr Kusher.

The question is, where to from here?

The Federal Treasurer, Josh Frydenberg has thrown his support for governments to look at alternatives to stamp duty.

If we are to “switch to a broad-based land tax, this could effectively make the states up to $17 billion better off” says My Coates.

GST is a broad-based tax, however, “GST doesn’t stop us from purchasing things. We didn’t think about the GST on every single purchase we made today” said Real Estate institute of New South Wales Chief Executive Officer, Tim McKibbin. “On the other hand, a narrow-based tax like stamp duty has the ability to stop people from purchasing property”.

Experts are weighing in to say that the removal of stamp duty is one of the best options for boosting economic growth post-COVID-19.

Whether you are for or against either of these options, but it is an interesting proposition in an unprecedented time.