Stamp Duty Tax Analysis

Australian stamp duty is a kind of tax that the Australian government collects when selling properties. This kind of tax is not charged on the half of the Federal Government of Australia, it collected by the individual states. Meanwhile, each state has their own stamp duty policy and own rate (Mortgageport 2015). In general, the stamp duty is related to the price of properties, the higher price, the higher tax.

According to the Revenue SA (2018), the latest stamp duty rates on South Australia are shown below. This chart clearly identified how many stamp duties will be paid in corresponding price range.

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In the early 19th century, to make property transactions legally binding, many documents needed to be stamped with government seals, which provided the best opportunity for Australian governments to collect taxes and minimize tax avoidance. However, Australian government have had a further developed and comprehansive register system: Torrens Title system, which means government can easier to identify the land owner and collect the land tax. Although many states have begun to collect land tax, stamp duty remains the main way to increase income from real estate (Michael Janda 2013). Recently years, the stamp duty is being criticized as an inefficient policy which imposing much unreasonable pressure to the home buyers.

Though stamp duty tax has been a big part of state government revenue, it causes inefficiency by affecting the property market and transaction volume.

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1. The impact of stamp duties on the property market

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Graph1: tax in property market

In property market, the supply curve is quite steep, because house supply is almost fixed and won’t be affected by other factors in short run. The demand curve is relatively flat, for there are many substitute options to property purchases. After the government impose stamp duty tax, the purchasing price which include the tax is closer to the pre-tax price. The selling price which received by house seller is much lower than the pre-tax price. Thus, in this case, the house vendors will take more tax than buyer when a deal is done and they become less willing to sell their property. Stamp duties reduce the investment in the housing stock and wide the gap between the price buyers pay and sellers receive. It also has impact on secondary market when existing properties change hands. Because stamp duties rise the transactions cost on both side, and reduce activity in secondary market.