March 31, 2014
Some real estate experts and home buyers believe that stamp duty is an unnecessary tax that makes the cost of purchasing a home prohibitive. Others maintain it is a necessary charge that ensures legal paperwork is paid for. There are valid points to be considered on both sides of the argument, so who's right about stamp duty? Let’s delve in and take a closer look.
About stamp duty
Stamp duty is a type of tax that is applied on top of the cost of buying a home. The money collected as stamp duty is used to pay the legal fees associated with filing paperwork during a real estate transaction. Ownership can't transfer to the new owner until this money is paid. This tax can amount to tens of thousands of dollars, so it's true that stamp duty adds significantly to the total price of buying a home.
Does everyone pay stamp duty?
An interesting fact that you may not know is that some people are exempt from paying the stamp duty. You may qualify for an exemption if you are purchasing a home that is priced under a certain threshold. This threshold varies by state, so it's important for you to consult a mortgage broker to determine the fees you will be paying for your location.Energy-efficient homes may also quality for a stamp duty exemption though there are strict standards of carbon emission that must be met in order for this tax exemption to qualify.
How stamp duty is used
Stamp duty is a cost connected to the filing of legal paperwork, but the bottom line is that this fee is a type of tax. That means that the government is able to use the stamp duty to pay for public services. There was a time when the hefty stamp duty was needed to pay for complex filing systems that were difficult to navigate, but modern technology has made the process much easier. Stamp duty is now used as a general income stream for the government, and many economic experts agree that a repeal of the stamp duty in favour of an alternate tax on land would be logical.
A housing transaction and transfer tax is likely to be necessary into the future, but the high cost and redundancy of the stamp duty fee make a call for change important. Stamp duty costs make it difficult for new buyers to enter the real estate market. Not only that, but stamp duty no longer goes exclusively toward legal fees related to a single transaction, thus alternate tax structures would be beneficial for both the government and real estate buyers.