As the Economic Roundtable wraps up in Canberra, Domain’s Chief of Research and Economics Dr Nicola Powell says stamp duty reform should be at the top of the agenda.
Her comments come from a new Domain analysis, The Growing Burden of Stamp Duty: Why Replacing It with a Fairer, More Efficient Land Tax Should Be Top of the Economic Roundtable’s Agenda.
Dr Powell said stamp duty is “one of the most damaging taxes in Australia – distorting housing decisions, penalising mobility, and locking people out of home ownership. It acts as a drag on productivity and a handbrake on a more dynamic, better-matched housing market”.
Rising Costs, Slower Incomes
The analysis shows stamp duty has significantly outpaced household income growth.
In the eastern states, costs have risen between 2.7 and 3.4 times faster than incomes since 2000.
“To put that into perspective, the stamp duty on a median-priced house in Sydney has increased from 45% of gross household disposable income per capita in 2000 to 120% in 2024,” the report notes.
“What was once a relatively manageable upfront expense is now a significant barrier, forcing buyers to save for longer and pay more – on top of already steep deposits”.
Australians are also staying in their homes longer.
The average hold period for houses has stretched to nine years, up three years compared with 15 years ago.
A Costly and Inefficient Tax
The report states that “for every dollar [stamp duty] raises, around 70 cents of potential economic activity is lost. By contrast, raising the same amount through a broad-based land tax costs the economy less than 10 cents”.
The economic downsides listed in the analysis are extensive:
- “Raises the barrier to home ownership – adds a significant upfront cost, especially for first-home buyers who already face high deposit hurdles.”
- “Reduces housing mobility – discourages people from moving to take up job opportunities, shorten commutes or find homes that better suit their needs.”
- “Exacerbates housing mismatch – locks Australians into homes that are too large or too small simply to avoid paying stamp duty.”
- “Hurts productivity and wage growth – limits the ability of workers to relocate to where skills are most needed, reducing the dynamism of labour markets and cities.”
- “Creates volatile state revenues – property cycle swings cause stamp duty revenues to fluctuate wildly.”
- “Deepens inequities – falls disproportionately on younger Australians and frequent movers, while long-term owners contribute nothing additional despite rising property values”.
The report also highlights research showing that “a 100 basis point decrease in the rate of stamp duty would increase property transactions by about 10%, and the removal of stamp duty in NSW would lift transaction volumes between 40-70%”.
Lessons from the ACT
The ACT remains the only jurisdiction to have fully committed to reform.
“In 2012, the ACT government began a 20-year reform program to gradually phase out stamp duty and replace it with higher annual rates – effectively a broad-based land tax that applies to all residential properties, including owner-occupied homes”.
“This staged approach avoided fiscal shocks, gave households time to adjust, and ensured all properties contributed to revenue”.
By contrast, NSW’s short-lived opt-in model for first-home buyers in 2020 was scrapped in 2023 after a change in government.
Federal Leadership Needed
The analysis points out that “federal support – through transitional funding and a national reform framework – would make the shift politically and financially viable”.
It argues that while stamp duty provides states with large, immediate revenues, land tax would deliver smaller but more predictable flows over time.
The broader benefits—greater housing efficiency, improved mobility, and stronger productivity—would flow through to the national economy.
A Chance to Break the Deadlock
The report is blunt: “Stamp duty is a relic of an earlier era: a blunt, inefficient tax from a time when property values were modest and mobility less vital to economic growth. If governments are serious about improving housing affordability, labour market dynamism and productivity, replacing it with a broad-based land tax is one of the clearest wins available. The economics are settled. The barrier is politics”.
“The Economic Roundtable is the moment to break that deadlock – and to put Australians on a path to a fairer, more efficient, and more mobile housing system”.
