The Stamp Duty Tax Dilemma !

Stamp duty is a state government tax that is proving to be a hurdle to young people getting into home ownership.  Not only do they need to save to have a deposit, but the stamp duty levied on the purchase of a home needs to be paid immediately and that runs to thousands of dollars.

So, exactly what is stamp duty  ?   It is a requirement that the transaction in which someone buys property is duly recorded in the government records by the affixing of payment stamps that have a value that reflects the value of the transaction.  Those stamps are purely a government creation to provide a revenue source for the state in which the transaction occurred.

In retrospect, it is probably wrongly  levied in the reverse order.   It should have been required on the sale of a property rather than the acquisition because the property owner selling is better positioned to pay a transaction levy than the buyer, who is usually struggling to afford the purchase.

Now it is suggested that stamp duty be replaced with a land tax and the only difference is that this is paid annually in instalments instead of in a lump sum when the property is first purchased.  To protect property owners who have already paid stamp duty this arrangement would need to make all existing farm and property owners exempt from this land tax and only apply it to properties conveyanced from its starting date.

The first hurdle to such a change would be the impact on state finances.  Stamp duty is a very important component of state government finance and a conversion to land tax would transfer lump sums paid at the time of purchase to lesser amounts paid annually.  State finance expenditure is built around stamp duty timing to fund important projects and this change would throw it into disarray.

That would be an incredibly messy arrangement.  We would have recent home buyers paying a land tax and avoiding the need to pay stamp duty and the bulk of existing property owners being exempt from that land tax.  It seems inevitable that this indemnity from land tax because of the stamp duty already paid would have a time limit and eventually a land tax would apply to all property.

Of course, the public attention focussed on stamp duty relates to the huge impost that occurs when real estate changes hands but stamp duty applies to lesser transactions.   We pay stamp duty when we purchase a new car, but because the cost is so much lower this does not attract the same attention  The reason stamp duty is under fire is the extraordinary inflation that has occurred in the house and land field.  The essential need for somewhere to live has driven home prices to heights that would have been deemed impossible just a few short years ago.   It is impossible to predict future trends.

Finding an acceptable method of evening out this stamp duty cost will be a nightmare for the financial wizards faced with the task, but for the ordinary householder pondering what the outgoings may be for the future the only safe bet is that a very wise man once made about the financial future.

The only eventuality is - death and taxes !