Bracket creep !

We live in a world of wonderful inventions.    In the last two centuries humans have replaced candles with electric light, been able to communicate by telephone and both the aeroplane and automobile have given them mobility.    What a pity that nobody has been able to create a time machine so that we could go back to the past and correct some of the mistakes we have made !

One of the imposts that urgently needs review is stamp duty.   When people try and obtain that most basic of needs - a roof over their heads - they find a rapacious treasury with it's hand out for a huge fee for just stamping approval on the record of sale.     The average fee demanded on a Sydney property is now $ 25,000.

Way back in 1986 the stamp duty rate was increased from 2.5% to 4.5% on properties valued at over $ 300,000 and to 5.5% on those priced over a million dollars.   At that time, the median house price in Sydney was $ 98,325 and the average yearly salary was $ 22,000.    It was simply a tax grab aimed at the upper end of the market - but those stamp duty rates have not been adjusted for the bracket creep that has occurred in the housing market.   Now a $ 500,000 home is just " average " !

Realists know that the government needs a money flow to pay it's bills, but imposing a crippling tax on those trying to get their first home seems to be putting the cart before the horse.    The timing is lousy !   The first home buyer struggles to raise a deposit on an ever rising market and the early years of the average mortgage usually saps an onerous slice of their income stream.

Whoever dreamed up the idea of stamp duty simply applied it to the wrong end of the deal.   It would be better placed at the other end of the housing market - when that first home eventually goes on the market for resale.    By then the first home buyer has either cleared the mortgage or has significant equity - and the stamp duty impost is a lesser burden.

It is too late to make that adjustment now.   Stamp duty has already been paid on the vast majority of housing stock and to make that change would be a case of doubling the tax on existing owners.  The only possible relief would be to make a rate adjustment to take account of bracket creep, but that would deprive the government of a much needed money source - and would be anathema to treasury.

Unfortunately, this looks likely to be an ever widening problem.   The housing market is giving no indication that pressure on prices will ease and the present very moderate rate of inflation will see that stamp duty climb higher as the years progress.

Those aspiring to buying their first home can only hope that some genius will succeed in inventing a time machine - and then perhaps a lot of wrongs could be righted !