REIA faces tough sell in calling for end to stamp duty

The country's peak real estate industry body has called for the abolition of stamp duty but faces a tough task convincing the revenue-dependent states to relinquish one of their main sources of income.

Stamp duty land tax memo and model of home.
Stamp duty as a percentage of state earnings has leapt in the past decade, while land tax is often touted as an alternative. (Image source:

The property industry’s peak body has launched a campaign to abolish a property transaction tax that now accounts for between 24 and 40 per cent of the various state governments’ revenues.

The Real Estate Institute of Australia (REIA) has stamp duty in its crosshairs as it targets the tax it says burdens first-home buyers with an additional four years of saving.

It promises to be a difficult sell to the states, whose reliance on the tax has only increased over the years while state governments show few signs of surrendering the keys to the vault.

The new national and multi-year campaign is aimed at phasing out stamp duty, which the REIA said was contributing to property supply in Australia being critically low and impacting housing and rental affordability in every state and territory.

Most commentators agreed it was a flawed tax, but as Peter White, Managing Director of the Finance Brokers Association of Australia, told API Magazine that getting rid of the tax altogether may be a utopian dream.

“The states are reliant on the revenue, so while the REIA’s campaign is a noble cause, it’s going to be a tough sell to the states, some of whom have said they’re not considering changes and others are actually raising stamp duty,” Mr White said.

'Inefficient, unfair'

REIA President, Hayden Groves, argued that as Australia moves through the current economic and real estate cycle, there is no area of reform that will have greater benefits than the phase out of stamp duty.

“With cost-of-living pressures mounting, stamp duty remains a major hurdle to first-home buyers, those wanting to move around the country or invest in much-needed rental supply.

“At a time when housing supply presents such an immense challenge, the removal of stamp duty could increase sales and rental listings by up to 50 per cent within existing housing stock.”

Mr Groves said that the removal of stamp duty, which was promised and not delivered with the introduction of a goods and services tax (GST) in 2000, would kickstart the economy, improve affordability and supply, and open opportunities for all Australians.

“There is almost universal agreement that stamp duty is an inefficient, unfair tax that stifles labour mobility and penalises those seeking to move to areas where better employment, educational or lifestyle opportunities exist.

“First-home buyers seeking to buy established homes are forced to delay buying decisions to save for stamp duty.

“Stamp duty adds about 4 per cent to the median house price of a home and adds on average $30,000 to the typical property purchased in Australia.

“Both directly and indirectly, stamp duty is contributing to property supply in Australia being critically low and impacting housing and rental affordability in every state and territory.”

New South Wales has shuffled the deckchairs around and the end result is probably neutral.

- Peter White, Managing Director, Finance Brokers Association of Australia

​Mr Groves said stamp duty reform would require the will and collaboration of many across Australia’s Federation, and Axe the Tax aims to start a proper conversation on a national level.

Stamp duties as a percentage of average earnings have jumped over the past nine years to 34.3 per cent from 25.1 per cent.

The property downturn, however, is set to slash $7 billion from stamp tax revenue this year across NSW, Victoria and Queensland.

Revenue NSW figures show there were over 19,000 transactions in July, from which the NSW Government collected more than $981 million in stamp duty.

Land tax alternative

Stamp duty reform has unquestionably been on the radar of various state governments.

The latest NSW Government Budget included a new policy to offer first-home buyers the choice to pay a one-off lump sum tax, or stamp duty, or an annual land tax when purchasing homes under a certain value.

To recoup some of this lost revenue, the NSW Government will introduce an annual land tax payment. This tax will be similar to local government rates. For example, instead of paying a one-off lump sum you end up paying it each year, indefinitely, while you own that property.

The negative effect of this policy shift is that over the time that people own the home they could end up paying more.

However, the benefit is that it makes it easier for people to get into the property market quicker.

Arun Maharaj, CEO, Hashching

Arun Maharaj, CEO, Hashching

“New South Wales has shuffled the deckchairs around and the end result is probably neutral, although it does have some cash flow benefits in that it allows people to pay off the debt annually instead of in a lump sum, and it makes the (NSW) government look like they’re doing something,” Mr White said.

Queensland still rakes in stamp duty but has also attracted the ire of property owners around the country by expanding their land tax so that it now has national reach.

Digital loan platform Hashching CEO Arun Maharaj told API Magazine that stamp duty is a formidable barrier to people transacting on housing.

“The alternative is a land tax, which turns the lump sum into a recurring payment,” he said.

“We’re generally in favour of this, as long as the land tax remains a predictable value that buyers can easily factor into the monthly cost of their purchase alongside the mortgage.

“Convincing the public of this hinges entirely on how the tax is communicated, and the guarantees that can be put in place that a land tax will not become an issue for them later in life.”

For more on their position, the REIA has launched a new website and policy paper, The Case for Change: Stamp Duty Phase Out.

Continue Reading Tax ArticlesView all tax articles