Recently, stamp duty has been a topic of conversation not only in Western Australia, but also in the New South Wales and Victorian Governments. You might be asking yourself what exactly is stamp duty, why is it a hot topic now and how might this impact you? Which is why the team at REIWA have broken down the basics of stamp duty, to assist in answering these questions. What is stamp duty? Stamp duty on real estate transactions, also known as transfer duty, is a WA government tax that home buyers are required to pay prior to the settlement of a property that they have purchased. In WA, the amount a buyer pays in stamp duty is dependent on the below variables: The value of the property being bought; if you are a first home buyer;if you are a foreign buyer; and/or the type of property you are purchasing. Who is exempt? First home buyers are exempt from stamp duty if the value of the property is below $430,000 and they pay a concessional rate of stamp duty up to the value of $530,000. If a buyer is looking to purchase an off-the-plan unit, a 75 per cent rebate is available on stamp duty costs, but this is only for a limited time and will end in October 2021. In addition to normal amount of stamp duty, foreign buyers must pay an additional seven per cent surcharge on top of stamp duty on any property purchases. How much is stamp duty? If you are not a first home buyer, a foreign buyer and not buying a unit off-the-plan, then it is estimated stamp duty will cost approximately four per cent of a property’s sale price. For example, if a you save $50,000 for a home deposit, and are looking to buy a home at the current median house price of $495,000, then approximately, $17,000 of that deposit will go towards stamp duty. To calculate the stamp duty amount that you may have to pay on a property, view our stamp duty calculator. Why is it an issue? Stamp duty must be paid for every property purchased and adds a considerable amount onto the cost of home ownership. This is particularly the case if buyers have to add to the stamp duty amount onto any amount borrowed Due to this, many people looking to upsize, downsize or relocate their homes, choose not to as they cannot afford the tax associated with buying another property, others simply cannot save an adequate deposit due to a large chunk going towards transfer duty. This means for a couple looking for a bigger house for their growing family, may find it harder to find something that is within their chosen suburb. Or a senior couple who need to downsize due to their health are unable to. Can’t it be removed completely? Not exactly. Combined property taxes make up one third of the WA’s revenue which helps our economy. This means we need to look at an alternative way to remove stamp duty that will benefit both the buyers and the government. REIWA suggests that the WA government consider the benefits for a broad-based tax system, which would see the upfront stamp duty payment replaced with yearly payments, that would be calculated and paid in a similar way to how property owners currently pay their council rates. Spreading the cost of property taxes across many years will make home ownership a reality for more West Australians, while creating a steady and reliable stream of income for the State Government. A mechanism would have to be in place to ensure that those that have already paid transfer duty are not taxed twice during the transition. Why the push now? With Australia’s economy under pressure after the impacts of the coronavirus restrictions, the government and industry bodies are looking for ways that will help boost activity in the market and the economy. By abolishing stamp duty, it could help revive the states’ economy by allowing people to move house and spend money in the process, boosting our economy. REIWA modelling shows that every residential property transaction puts an additional $20,000 into our economy through employment, retail spending and trades. With the next WA election taking place in 2021, this provides the perfect opportunity for all sides of government to commit to a state tax review to take place. The WA Liberal Party has already committed to undertaking a review into the removal of stamp duty which can help move WA forward. More informationTo read more on REIWA’s advocacy efforts in relation to stamp duty, view our advocacy page or visit the Department of Finance website.