When a dollar extra paid for property costs you $3,000 in tax

As any buyer of a home for $550,001 or more will attest to, stamp duty rates in Victoria are in need of revision. 

It will surprise most home buyers to know that if you purchase a home to live in for $550,001 rather than $550,000 then you will be forced pay an additional $3,100 in stamp duty. This is because the stamp duty payable on a home purchased for $550,000 is $24,970 and on a home purchased for $550,001 it is $28,070.

This anomaly dates back to 2007, when stamp duty rates were cut for homes lived in by the purchaser and valued under $550,001. Those purchased for a higher amount were subject to the older stamp duty scales.

There is no rational reason for this, and it seems unfair to penalise buyers who need to pay just a little bit more. To someone buying a new home, $3,100 could, for example, meet relocation costs or legal expenses.

It’s interesting that the distortion to the scales does appear to have created a high number of buyers at the $550,000 price point. In 2011 there were 418 buyers who paid $550,000 and avoided the extra $3,100 in stamp duty and only 28 who paid between $550,001 and $551,001. This, however, may simply be because $550,000 is a round number.

The REIV has campaigned to have stamp duty reduced; however, the unfair distortion of the tax scales at $550,000 shows that the rates could also easily be made fairer.

Enzo Raimondo is CEO of the Real Estate Institute of Victoria.