What is stamp duty for & is it fair?
If you’re about to buy a house or apartment, or if you’ve recently taken the plunge, you may be left feeling a little shell-shocked by the notorious stamp duty levy. But what is this tax and what are its origins – and more importantly can its existence still be justified? Money Buddy digs deeper.
Where stamp duty originates from
Historically, stamp duty was literally a charge for the physical stamp impressed on or attached onto documents drawn up for the transaction of land and other legal matters (such as marriage licenses and military commissions). Australia’s Federal Government is not responsible for this levy and instead it is attributed to State Government only, with rates of stamp duty varying from state to state.
Where does the money go?
Stamp duty is added to all State Governments’ respective budgets, and primarily this revenue is to be used for Health, Transport & Roads, Police, Justice & Emergency Services, Education & Training, Human Services, and Environment, Climate Change & Water.
It’s regularly reported that much wastage makes up State Governments’ usage of tax payers’ money, and particular focus is lent to the seemingly unjustifiable stamp duty tax. Waste is never acceptable but profligacy with stamp duty revenue seems to incense tax payers (for whom Government spending appears so obscure) most, given its questionable validation.
With stories appearing in the press about State Government spending tens of thousands of dollars on lollies for politician meetings, or allegedly blowing cash on federal re-election ads, or throwing tax payers’ money at plane tickets for foreign journalists in order to smooth international relations, it’s not hard to understand the backlash against any tax that appears unnecessary.
Stamp duty: What you can do
So what can you do? In short, not a great deal, however if you’re a first home buyer, use the benefits available. First home buyer benefits are available in most states - see our stamp duty calculator for the amount of stamp duty that will be owing in your situation. Furthermore, first home buyer or not, if your new property is to be built on vacant land or you’re buying off the plan, stamp duty may be reduced.
Whilst you can’t do too much to influence how State Government collects and spends tax (other than at election time), stamp duty is something you can and should budget for. Is it fair? It’s hard to justify such a tax when very little is exchanged in return and it’s hard not to see it as the Government simply getting its cut. However, the Housing Industry Association says that stopping stamp duty for all first home buyers would cause a loss of $712 million this financial year for the Government, cash that would have to be replenished from somewhere - if all State Government spending is indeed necessary.
If you are soon to dip into the property market, be sure to factor in stamp duty to your budget - it’s probably always going to be a requirement, fair or not.