Stamp duty and equity in Australia

Melbourne Institute Working Paper No. 08/21

Date: June 2021


Manning Clifford
John Freebairn


Stamp duty is a core part of the Australian tax system, but large components of its effect on the economy are unknown. In particular, the distribution of stamp duty's costs are not well understood. This has been hampered by a lack of quantitative studies of stamp duty's costs, and by limited discussion of stamp duty's effect on rental markets. This paper addresses this gap by establishing a theoretical framework for understanding stamp duty's incidence, and then by estimating the distribution of its costs. We find that stamp duty is a regressive tax, and that this regressiveness is predominantly due to the fact that housing costs are a significantly higher share of household income in low income households. We also find that the economic incidence of stamp duty is not particularly relevant to interrogations of how costs are distributed, because (unlike in many other markets), most people who sell housing tend to purchase houses of a similar value within a short time period of selling. We also provide some thoughts on current reform proposals and then discuss how land taxes could be designed in light of political barriers.

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