Why Stamp Duty Still Exists When Every Economist Says It Should Go

The Tax That Everyone Agrees Is Terrible

Imagine a tax so widely condemned that economists across the political spectrum - from the Grattan Institute to the Reserve Bank to the Productivity Commission - agree it should be abolished. A tax that actively harms the economy, locks people out of housing, and punishes families for making perfectly reasonable life decisions.

That tax is stamp duty. And in most Australian states, it's still very much alive.

Stamp duty is a one-off tax charged when you buy a property. In New South Wales, buying the median Sydney home - currently around $1.1 million - attracts stamp duty of approximately $44,000. In Victoria, that same purchase could cost you $55,000 or more in duty. These are not trivial amounts. For most families, that's years of savings, wiped out in a single transaction before they've even moved in.

What's Actually Wrong With It

The economic case against stamp duty is overwhelming and has been for decades. Here's why experts hate it:

• It punishes mobility. When it costs tens of thousands of dollars to move, people don't move - even when moving would make economic sense. Retirees stay in large family homes rather than downsizing. Workers don't relocate for better jobs. Families stay in homes that no longer suit their needs.
• It distorts the housing market. By reducing turnover, stamp duty artificially constrains housing supply, contributing to price pressure in high-demand areas.
• It's economically inefficient. The Productivity Commission has repeatedly identified stamp duty as one of the most distortionary taxes in the Australian system - meaning it causes significant economic harm relative to the revenue it raises.
• It's volatile and unpredictable revenue. Because stamp duty depends on transaction volumes, state governments get a boom-bust revenue cycle tied to the property market. During a downturn, budgets crater. This is terrible fiscal planning.
• It's deeply inequitable. The burden falls entirely on whoever happens to be moving at a given time - including younger buyers trying to enter the market for the first time - rather than being spread across all property owners.

What Should Replace It?

The near-universal alternative recommended by economists is a broad-based annual land tax - a small recurring levy on the unimproved value of land, paid by all landowners every year.

The advantages are significant:

The ACT has actually been doing this since 2012 - gradually phasing out stamp duty and replacing it with land tax over a 20-year transition. It's not perfect, but it's evidence the reform is politically and practically achievable.

So Why Does It Still Exist?

Here's where it gets uncomfortable - and where we need to be honest about political incentives.

Stamp duty is enormously lucrative for state governments. NSW collected approximately $8.4 billion in stamp duty in 2022–23. Victoria collected around $8 billion in a peak year. Politicians have become addicted to this revenue, especially during property booms.

But revenue dependence isn't the only reason reform stalls. The deeper problem is who benefits from the status quo.

Existing property owners - particularly those with multiple properties - benefit from a system that suppresses turnover and keeps their asset values elevated. This group votes in large numbers and donates to political parties. First home buyers and renters, who bear the costs of an inefficient housing system, are less politically organised and less reliably engaged.

Both Labor and Liberal state governments have talked about stamp duty reform for years. NSW under both parties has tinkered at the edges. Victoria under Labor has done almost nothing. The ACT aside, meaningful reform has been consistently deferred, delayed, and quietly dropped whenever it meets resistance from property industry lobbying and nervous backbenchers in marginal seats.

This is not a failure of knowledge. Every government has access to the same Treasury advice, the same Productivity Commission reports, the same economic modelling. This is a failure of political will - and more specifically, a failure of a political system that responds to organised donor interests rather than the broader public good.

What Would Voters Actually Choose?

Polling on stamp duty is complicated by the fact that the question is rarely asked plainly. But when Australians are asked whether they support reform that would remove the upfront cost of buying a home in exchange for a small ongoing levy, support is generally positive - particularly among younger Australians locked out of the housing market.

The people who lose most from stamp duty - first home buyers, renters, workers who need to move for employment - are exactly the people whose voices carry the least weight in our current system.

In a direct democracy model, these voters wouldn't need to wait for a sympathetic MP or a friendly minister. They could vote directly on the policy. The question could be put plainly: do you support replacing stamp duty with a broad-based land tax, phased in over ten years? Let Australians answer it.

Instead, we have a system where the right policy is known, the evidence is clear, and nothing changes - because the people who benefit from inaction have better access to power than the people who would benefit from reform.

This Is Exactly Why Direct Democracy Matters

Stamp duty is a perfect case study in why representative democracy, as currently practiced in Australia, consistently fails ordinary people. It's not that politicians don't know better. It's that the incentives of the system push against good policy and toward the preferences of organised, wealthy, politically connected interests.

At Direct Democracy, our members don't just vote for a party and hope for the best. They vote on the policies themselves. When evidence is clear and the public interest is obvious, that should be reflected in outcomes - not buried under lobbying and electoral calculus.

If you're tired of watching bad policy survive decade after decade while politicians shrug and change the subject, it's time to demand a system that actually listens.

Take our policy quiz at directdemocracy.com.au to see where you stand on housing reform and dozens of other issues - and find out how your voice could directly shape Australia's future.