Is Stamp Duty Really Necessary?

If there’s one thing that makes many Australian home buyers’ blood boil, it’s stamp duty. The tax is assessed following a real estate transaction, and the buyer is responsible for paying it within 90 days. Stamp duty is based on the current market value of the home that’s being purchased, and it varies from one state and territory to the next. One thing’s for sure, though: People are overwhelmingly opposed to paying the tax, which can total up to considerable amounts of money. Like many, you may wonder why it’s levied and how it’s used. The answers may surprise you.

The Origins of Stamp Duty for Real Estate Transactions

When it was originally instated, stamp duty in Australia was simply a fee that was used to cover the administrative costs associated with stamping and filing various real estate documents. In the earliest days, then, the duty wasn’t too costly. Over time, though, territorial and state governments start increasing their stamp duty rates. They realised they stood to rake in considerable amounts of money through the tax, and they’ve been doing so ever since. With the average stamp duty for a $1 million home in Sydney clocking in around $40,000, it’s safe to say that the duty is no longer strictly used to cover administrative costs.

How Stamp Duty is Used

If stamp duty is no longer used to cover the administrative costs associated with real estate transactions, why do we still have to pay it? States and territories around the country have gotten used to collecting those revenues. From 2010 to 2011, New South Wales collected more than $4 billion in stamp duty fees. Needless to say, state governments don’t want to say goodbye to those funds. Furthermore, states and territories have discovered they can manipulate and stimulate the housing market by making adjustments to the stamp duty.

How to Avoid Stamp Duty

Various concessions are available to help offset or, in some cases, completely eliminate stamp duty. They vary from one state and territory to the next, however, and they change pretty often. The most popular and widely used among them are first home buyer concessions, which are governments’ way of acknowledging that first home buyers typically have very limited budgets. Even if you’re not a first home buyer, you may be eligible for other concessions. Check your local state or territory’s website to find out for sure.

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