Effective from I July 2001, the 0.15% stamp duty on transactions in marketable securities has been abolished. Stamp duty is the tax paid on all sales and purchases of marketable securities, which includes shares in companies, units in trusts, warrants, instalment receipts and options that are listed and traded on a recognised exchange.
This means that when the market opens this morning all trades on the ASX's markets will be free from stamp duty, reducing the cost of share trading and thus making the market more accessible and liquid.
ASX has fought for this development since the early-1990s. The first real progress came with the Queensland Government's decision to halve stamp duty (to 0.15%) in July 1995, a move quickly matched by other states. More recently, ASX actively supported the Commonwealth Government's decision to include stamp duty in its basket of state taxes to be abolished as part of its A New Tax System (ANTS) program.
"It is important to note that this historic change will benefit all Australians - not just the millions who already are involved in the stockmarket," ASX chief executive officer and managing director Mr Richard Humphry said.
"As a result of this, the level of overall activity in the market is likely to increase over time, generating greater liquidity and thereby reducing the cost of capital to Australian companies. Lower capital costs can help Australian companies remain listed on the Australian market. This in turn should have a direct effect on economic growth and activity, employment levels and, ultimately, the living standards of all Australians."
"All governments - federal, state and territory - are to be congratulated for this sensible and responsible development. It follows and complements other recent changes to the taxation system, in particular the effective halving of capital gains tax, which will boost the Australian market's ability to thrive in a global competitive environment."
Australia's abolition of stamp duty matches the taxation regime of the United States and New Zealand, and compares very favourably with that of Singapore (0.2%), Taiwan (0.33%), Hong Kong (2.2%) and the United Kingdom (0.5%).
The immediate practical benefit of the abolition of stamp duty is clear. An investor using a non-advice discount broker to buy or sell a $10,000 parcel of shares will probably face only half the cost for executing the trade.
This development continues the trend towards lower cost and easier trading, which importantly can benefit shareholders' investment strategies. As the ASX Shareholder Survey has revealed, while Australians have embraced the sharemarket in extraordinary numbers, many are still unnecessarily exposed to the risk of short-term downturns.
"Making trading cheaper will encourage investors to spread their risk while still being able to take advantage of upturns in particular asset classes or sectors. ASX believes that prudent diversification, together with investing for the longer term and seeking good advice, are the cornerstones to a sensible and successful investment strategy. The abolition of stamp duty can only benefit that goal," Mr Humphry said.
For further information on the abolition of stamp duty, including examples of how it benefits investors, please visit www.asx.com.au.
