A good example of an upward creeping tax impost is the current situation in New South Wales in relation to stamp duty on land transfers. The most recent NSW Budget disclosed what has been a stamp duty bonanza for the Government due to the rate of increase in the prices for residential property, particularly in Sydney.

Why is it a bonanza? The answer is because stamp duty on land transfers is calculated on a fi xed dollar amount plus a sliding scale percentage. That means the higher the sale price, the greater the duty. Examples of current rates are as follows:

• For land transfers for a value of over $300,000.00 to $1 million the rate is $8,990.00 plus 4.5% of the value exceeding $300,000.00.

• For land transfers over $1 million the stamp duty is $40,490.00 plus 5.5% of the value exceeding $1 million.

With the current heat in the Sydney property market, there is now nothing remarkable about a Sydney property being valued at more than $1 million. The Government is reaping windfall gains at the rate of 5.5% of every $1.00 of price increase over $1 million.

Where did the stamp duty rates come from?

Way back in 1986 the current rates were introduced and, at the time, the relevant Minister said that the rates of 4.5% and 5.5% “only affect properties worth more than $300,000.00 and thus will not affect the average home purchaser”. In other words, the rates were introduced at a time so long ago that an average Sydney property was considered to be one with a value of less than $300,000.00.

However, while the basis for the stamp duty rates may be 29 years old and hence outdated, there does not appear to be any inclination on the part of the NSW Government to review those rates.

John Clarke is the Solicitor Director of Clarke Law, with a local network of offices in Narooma, Bermagui & Bega

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