Buying a property doesn’t stop with your deposit and home loan. There are upfront and ongoing costs that take quite a punch on your budget – one of which is stamp duty. Understanding stamp duty helps you plan and prepare a budget that bends instead of breaks.
Here’s what you need to know about stamp duty and the concessions or exemptions that can save you thousands when you buy your home:
What is stamp duty?
If you’re purchasing a property, you may have come across the term stamp duty or transfer duty. It is a tax charged by the state and territory governments when you buy a property or other assets, such as cars. Since the money goes to the governments, stamp duty is used to fund public sectors, including transportation, education, roads and more.
How is stamp duty calculated in Australia?
Since each state and territory has different criteria, the price depends on the property’s price and location. Usually, it’s calculated as a percentage of the property’s value. This means that the higher your home or land price, the higher your stamp duty is.
Stamp duty rates and rules can change, so it’s important to check with your State Revenue Office. You can also use our stamp duty calculator to check how much it will cost you.
Can you avoid stamp duty in Australia?
Some states offer stamp duty exemptions in cases of death or divorce if you are eligible. Also, if you’re a first-home buyer, you may qualify for exemptions if you meet certain criteria. Let’s crunch numbers to give you an idea of how much you can save.
An existing property worth $500,000 in NSW will cost you over $17,500 on stamp duty. But if you meet the state’s criteria, you won’t pay stamp duty at all! Here are the different stamp duty exemptions that you can look forward to as a first-home buyer:
- NSW: You may qualify for a stamp duty exemption under the First Home Buyer’s Assistance Scheme (FHBAS).
The NSW government introduced the First Home Buyer Choice scheme, which is set to be implemented during the second half of 2022. This scheme will allow first-home buyers to choose between an annual property tax and stamp duty for properties priced up to $1.5 million.
- Queensland: If the home is valued at $500,000 or less or the vacant land at $250,000 or less, you won’t pay stamp duty.
- Victoria: If you enter and settle the contract on or after 1 July 2017 and meet the criteria for the First Home Owner’s Grant, you may be eligible for a stamp duty exemption if the home is valued at $600,000 or less.
- ACT: Your total gross income, including your partner’s (if any), before the transaction date should not go beyond certain income thresholds.
- Western Australia: There are stamp duty exemptions available for homes valued at $430,000 or less and land valued at $300,000 or less.
Can you get a discount on stamp duty?
If you don’t qualify for exemptions, here’s good news: There are some ways to get concessional rates on stamp duty. Some types of concessions may apply to other groups, including pensioners and people with disabilities. Also, first-home buyers may enjoy these stamp duty discounts:
- NSW: Under the FHBAS, you may qualify for a concessional rate if you buy new or substantially renovated properties valued between $650,000 and $800,000 and land valued between $350,000 and $450,000.
- Queensland: You may qualify for the first home concession or the first home vacant land concession if you meet the price caps.
- Victoria: If you enter and settle the contract on or after 1 July 2017, you may be eligible for a concessional rate if the home is valued between $600,001 to $750,000.
- ACT: You may also receive a concessional rate if you qualify for the Home Buyer Concession Scheme.
- Western Australia: Concessions apply to new houses valued between $430,001 and $530,000 and land valued between $300,001 and $400,000.
- Tasmania: If you buy an established house from 1 January 2022 to 30 June 2023, you may qualify for a 50% discount on stamp duty if the home is valued at $600,000 or less.
When do I have to pay stamp duty?
Since the state and territory governments handle stamp duty, the payment period also varies:
- NSW: Within 3 months of contract exchange or on settlement
- Queensland: Within 30 days of settlement
- Victoria: Within 30 days of settlement
- ACT: 14 days after the title is registered at Access Canberra and within 14 days to lodge your transfer instrument
- Western Australia: 1 month after the issuance of the duties assessment notice
- Tasmania: Within 3 months of the transfer
- Northern Territory: On settlement or within 60 days of entering the transaction
- South Australia: On settlement
Can you add stamp duty to your loan repayments?
Unfortunately, stamp duty is an upfront cost that you usually need to pay within the settlement. So, you can’t pay it through your monthly loan repayments. Stamp duty is payable within days or months of settlement depending on the state.
One thing you can do is consider the stamp duty amount on your home loan. Here’s what it looks like: If you qualify for a low deposit, you may dedicate a part of your savings to the stamp duty. But keep in mind that doing this risks you from paying Lender’s Mortgage Insurance (LMI) and increasing your monthly repayments.
Do you need to pay stamp duty on your second home?
Stamp duty is a mandatory tax charged by state and territory governments. Unless you qualify for exemptions or concessions, you need to pay it every time you purchase a property or an asset.
Is stamp duty based on the purchase price or valuation?
Stamp duty will either be based on the purchase price or valuation, whichever is higher. But in some circumstances, if the property is transferred between related parties (e.g. families or friends), stamp duty can be based on the property’s current market value.
Want a hassle-free buying journey?
Stamp duty can blow your budget, so understanding your options can save you thousands. No need to go through the complicated paperwork and eligibility criteria. Our expert brokers are here to do it for you! Choose from the top 40+ banks and lenders for the right loan tailored to your needs.
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Will Australia’s current interest rate climb or finally settle in? Stay tuned for our upcoming blog about the RBA’s announcement.