A simple guide to stamp duty for properties
When buying a property in Australia, there are numerous Government costs and legal fees to bear in mind and one of the biggest costs that must be paid is stamp duty. So what exactly is stamp duty and when must it be paid?
What is stamp duty?
Essentially, stamp duty is a tax which is applied by all the state and territory governments in Australia on various types of transactions such as insurance policies, issue of motor vehicle licences as well as when buying property. However, stamp duty differs depending on which state you are buying in.
Stamp duty was first associated with the cost of the actual stamp that was attached to documents regarding land transactions as well as other legal matters.
When must stamp duty be paid?
When buying property, then stamp duty must be paid within 30 days of settlement of the property and it is a legal requirement to do so. For off the plan properties, this means that it could be a year or more until you have to pay stamp duty which gives you more time to save. If you are buying an established property, then make sure you include these costs when looking to purchase as you will have to pay this sooner.
Who pays stamp duty?
The cost of stamp duty will vary for a number of different reasons depending on the property value and the state you are buying in. Everyone has to pay stamp duty, but there are some exemptions and concessions, such as for first home buyers and off the plan sales.
First home buyers may be eligible for stamp duty concessions, but this differs for every state. The main types of concessions include:
First home buyers
Off the plan concession
Principal place of residence concession
Young farmer’s exemption/concession
How is stamp duty calculated?
Working out the cost of stamp duty yourself can be extremely confusing and difficult, especially as each state has its own set of rules you need to abide by. There are also exemptions and concessions to factor in.
Generally speaking, the cheaper the property the less stamp duty you have to pay, whilst the more expensive a property the more stamp duty you pay. Stamp duty is calculated by using a sliding scale of taxation, which moves depending on the property value.
Usually, a state will have a tiered system of property values which gives a set amount to pay, plus an extra charge for every $100 over this amount. For example, in NSW a property valued between $300,001 - $1 million will incur a duty of $8,990 + $4.50 for every $100 after $300,001.
A property valued at $500,000 in NSW will therefore incur a stamp duty cost of $17,990.00.
An easy way to calculate stamp duty is by using a stamp duty calculator which can automatically calculate this for you. Our iBuyNew Stamp Duty Calculator is able to do this for you for all states in Australia.
Is there a way to avoid paying stamp duty?
Unfortunately, there is no way to avoid paying stamp duty, unless you are a first home buyer who intends to live in the property first and then turn it into an investment property later on to take advantage of the stamp duty concessions and then the benefits of a property investor.
What are the stamp duty concessions and exemptions?
As previously mentioned, stamp duty concessions differs per state and territory in Australia. Here is a brief overview for New South Wales, Victoria and Brisbane.
Under The First Home – New Home scheme which commenced 1 January 2012, eligible purchasers are exempt from transfer duty on new homes valued up to $550,000. Between $550,000 and $650,000 there are concessions on stamp duty.
For eligible purchasers buying a vacant block of residential land to build their home, then no stamp duty is required on purchases up to $350,000, and purchasers will receive a concession on vacant land valued between $350,000 and $450,000.
Please refer to Office of State Revenue for more information.
There are various types of concessions for stamp duty in Victoria. The main types are:
First home buyer duty reduction – a one-off duty reduction for a PPR valued up to $600,000.
Off-the-plan concession – a duty concession for an off-the-plan property, either as a land and building package, or as a refurbished lot.
Pensioner concession – a one-off duty exemption or concession for a new or established home valued up to $750,000
Principal place of residence (PPR) concession – a duty concession for when a property you buy, valued up to $550,000, is intended as your primary home.
First-home owner with family exemption/concession – a one-off duty exemption or concession for properties valued at $200,000 or less
Young farmer’s exemption/concession – a one-off duty exemption/concession for young farmers buying their first farmland property.
Please refer to State Revenue Office for more information.
Exemptions from transfer duty include
Death of a property owner exemption
Home or property owner exemptions
Charitable institution exemption
Other exemptions under particular Acts
Home concession – If you buy a home and move into it within one year of the transfer date or live in the home as your primary place of residence then you are eligible for the concessional transfer duty rate which applies to the first $350,000 of the consideration of value of the home. The general transfer duty rate then applies to the balance.
First Home Concession – You can claim a concession if your home is valued at less than $500,000; however the home concession rate is still used to calculate the duty.
Please note: The concession does not apply to any part of the land that’s used for non-residential purposes.
Under $505,000 = Up to $8,750 off Stamp Duty
Between $505,000 - $549,999 = Part Concession
Over $550,000 = No concession
Please refer to Queensland Government for further information.