Stamp Duty

Bracket Creep and the hit on Homes and Primary Producers

The 2015 SA Budget

The South Australian Budget in June 2015 provided some welcome relief from taxes in a number of areas.  Some of these included:

  • abolition of stamp duty on non‑real property transfers[i];
  • abolition of stamp duty on shares and other non‑quoted marketable securities[ii];
  • provision of legislative corporate reconstruction relief;
  • stamp duty and land tax exemptions for a principal place of residence in a special disability trust; and
  • expansion of exemptions for interfamilial farm transfers involving trusts.

These measures, particularly the abolition of stamp duty on non‑real property transfers, mean that it is  possible to transfer business and other assets (other than real property) without stamp duty and it is now possible to consider restructuring arrangements which may previously have been unattractive because of potential stamp duty costs.

Phase-out of Duty for Some Land Transfers

As well as removing stamp duty on non‑real property transfers, the Budget announced the intended phase‑out of conveyance (transfer) duty on some real property transfers, with a 1/3 reduction from 1 July 2016, a further 1/3 from 1 July 2017 and a complete abolition from 1 July 2018.  This has been brought forward by an announcement on 7 December 2015, and the first 1/3 reduction is now in effect from that date.

The phase‑out only applies to “non‑residential, non‑primary production real property”, which is described in new section 71DC of the Stamp Duties Act as “qualifying land”.  Information Circular No: 86 of Revenue SA [iii]indicates that the Commissioner of State Taxation will generally rely on land use codes to determine whether land is residential or primary production land on the one hand, or qualifying land on the other.  Qualifying land would include land within the following land use codes:

  • commercial;
  • industrial;
  • vacant land (with some exceptions);
  • institutions;
  • public utilities;
  • recreation; or
  • mining and quarrying.

Residential and Primary Production Land

The Circular emphasises that conveyance duty will remain on transfers of residential and primary production land.  Although in many cases it will be obvious as to whether land is either residential or primary production land or qualifying land, there are likely to be “grey areas”, and situations in which transfers include both qualifying land and residential or primary production land.

How is Land Use Determined?

The Circular of Revenue SA indicates that the Commissioner will take into account information from the Valuer‑General to determine whether the predominant use of land is for residential or primary production purposes.  The Commissioner may determine that land is residential, even if not used predominantly for any purpose:

  • if improvements on the land are residential in character; or
  • if land is vacant (or with only minor improvements) and in a residential zone in a Development Plan.

The Commissioner, however, may determine that land is commercial, and qualifying land, even if it is coded residential by the Valuer‑General, consistent with Local Government zoning, including categories such as hostels, hotels, motels, service departments and short term unit accommodation.

The Commissioner may also consider land that is not currently used for primary production is to be taken to be used for that purpose if that classification has been assigned to the land by the Valuer‑General.

Because of the disparity in rates of duty between qualifying land and residential and primary production land, the Circular draws attention to a new “robust” anti‑avoidance provision in the Stamp Duties Act (section 109) and also emphasises that the relevant date for imposition of duty is the date of a contract, not the date of a transfer of real property pursuant to the contract.

Bracket Creep

The Budget changes to stamp duty are clearly of benefit for businesses, but the retention of conveyance duty on transfers of residential and primary production land will, in effect, fund the relief that is provided to business.  Stamp duty can be a substantial impost.  Currently, the rates of duty for the sale price or value of property conveyed, whichever is higher, are in the following brackets:

(i)            Up to $12,000.00 1%
(ii)           the excess over $12,000.00 to $30,000.00 2%
(iii)          the excess over $30,000.00 to $50,000.00 3%
(iv)          the excess over $50,000.00 to $100,000.00 3.5%
(v)           the excess over $100,000.00 to $200,000.00 4%
(vi)          the excess over $200,000.00 to $250,000.00 4.25%
(vii)         the excess over $250,000.00 to $300,000.00 4.75%
(viii)        the excess over $300,000.00 to $500,000.00 5%
(ix)          the excess over $500,000.00 5.5%

There has been a lot of discussion recently in relation to the insidious effect of “bracket creep” in relation to income tax.  The amount of “creep” for income tax, however, is insignificant compared to stamp duty. It will be obvious that the very substantial increases in the prices of real estate, particularly residential properties, in recent years will mean that stamp duty will be imposed at much higher bracket rates for most properties than would have been the case when the rates were introduced.

A graph on the South Australian Government web site [] shows that in June 1998 (where the graph starts) the median house price in the Adelaide Metropolitan Area was a little under $125,000 and in June 2015 was a little over $425,000 – an increase in round figures of $300,000 – or, as a percentage, 340%.

In 1998 there were only six brackets for rates of duty in Schedule 2 of the Stamp Duties Act. The sale price of a property of $125,000 would have been in the second highest bracket and have incurred stamp duty of $2,830 plus 4% on the excess over $100,000 – a total of $3,830. The highest bracket for the excess over $1 million was then 4.5%.

On a median price of $425,000, currently stamp duty will fall into the second highest bracket and will be $11,330 plus 5% of the excess over $300,000 – a total of $17,580.  The buyer of a median priced house in 2015 would pay $13,750 more stamp duty than the buyer of a comparable house in 1998. The proportionate increase in the stamp duty is 459%. As a proportion of the median house price, duty in 1998 was 3.06% and in 2015 was 4.14%.

There have been numerous amendments to the rate brackets in Schedule 2 of the Stamp Duties Act. One of the most significant was in 2002 when the number of brackets became nine, the upper limit for the top bracket was reduced from $1,000,000 to $500,000 and the top rate went from 5% to 5.5%. There has been a clear pattern of amendment of the rates to increase the overall effective rate of stamp duty, which is pretty creepy.

Alternative Taxation Systems

Stamp duty has always been an arbitrary and unpopular form of taxation. Many studies, including the Henry Report[iv] and more recently the Federal Treasury White Paper Rethink have suggested that there should be no role for stamp duties and that a broader based land tax would be a better alternative.

However, the likelihood of any change in the near future is remote and it seems that transfers of residential properties and primary production properties will continue to incur the burden of stamp duty for some time, as will transfers of commercial properties, although at reduced rates.

[i] Some goods will be prescribed goods and will be included in a dutiable land transaction where the goods have a significant connection with land.

[ii] Dealings in interests in land holding entities will continue to be assessable.

[iii] Circulars are an expression of the view of the Commissioner as to the interpretation of the Act and its practical application, but are not law.  Issues may arise in relation to the application of these provisions in practice.

[iv] Australia’s Future Tax System, Report to the Treasurer, December 2009, recommendations 51 – 54.

For more information, please contact:
Sandy Donaldson

Sandy Donaldson
p.  +61 8 8124 1954
e.  Email me

This communication provides general information which is current as at the time of production. The information contained in this communication does not constitute advice and should not be relied upon as such. Professional advice should be sought prior to any action being taken in reliance on any of the information. Should you wish to discuss any matter raised in this report, or what it means for you, your business or your clients' businesses, please feel free to contact us.

Legal Enquiry

Need assistance? Describe the matter and we’ll be in touch asap.

Legal Enquiry Form

News Subscription

Stay up to date. Key legal developments, firm news and events.

Subscribe Now


Level 14, 96-100 King William Street Adelaide SA 5000

CALL +61 8 8124 1811

Connect with us

© Copyright - DW Fox Tucker Lawyers - Commercial Lawyers Adelaide