What is Stamp Duty?
Most people have heard of stamp duty, but do you have a good understanding of what it means for you if you’re considering buying property? Stamp duty, also known as land transfer duty, is an unavoidable additional expense that must be paid when buying property. But what is stamp duty? If you’re considering a real estate purchase in Australia, it’s vital to understand how stamp duty applies to your property transaction, when it needs to be paid and how much it will cost you.
Unfortunately, paying tax is an unavoidable part of buying real estate in Australia. If you’re purchasing a property, you’ll need to factor in how much you need to pay in stamp duty because this can significantly affect your budget and how much you’re actually able to afford to spend on a property. Stamp duty, also known as land transfer duty, is often a considerable amount and it usually needs to be paid fairly soon after the property has been purchased.
So, what is stamp duty and how might it affect your property purchase?
What is stamp duty?
Stamp duty is a government tax imposed by the state governments that must be paid whenever a property transaction takes place in Australia. If you’re buying a property you will need to take stamp duty into account because it is an extra expense that you will have to pay during the period of property title transferral. Stamp duty is a tax that is applied to cover the expense of transferring the property title to a new owner.
How much does stamp duty cost?
So, how much will it cost you? Stamp duty cost varies from state to state, as well as from property to property. Broadly speaking, stamp duty is calculated as a percentage of the purchase price, or as a percentage of the market value of the property. Stamp duty cost tends to rise in line with how expensive your property is, so the cheaper the property, the lower the stamp duty.
There are several other factors that can affect how much stamp duty you will be required to pay such as whether the property is being purchased as a home or as an investment, whether you’re a foreign purchaser or Australian, and whether its vacant land.
Whilst it’s important to talk to your loan provider and property conveyancer to work out exact figures and to understand how the stamp duty will apply to your case, as a very rough rule of thumb, in Australia stamp duty is usually around 3-4% of the purchase price of your property.
Is it possible to avoid paying stamp duty?
Exemption from stamp duty is possible in particular circumstances such as if a property is gifted or inherited, or if you are a first-home buyer in certain Australian states or territories. Concession rates may also be available for pensioners, carers or farmers depending on where is Australia your property is located.
Is stamp duty the same across Australia?
No, stamp duty costs vary between the different Australian states. Generally, stamp duty costs increase on a sliding scale in line with the value of the property purchased, but the actual cost of stamp duty will be different depending on which state or territory the property was purchased in.
In Victoria stamp duty starts at 1.4% for properties valued at $25,000 or less. The rate increases to 5.5% for properties worth more than $960,000.
In Queensland no stamp duty is required for the purchase of properties that are valued at less than $5,000. For properties costing less than $75,000 the rate increases to 1.5%, and for properties worth more than $75,000, stamp duty is calculated at being $1,050, plus $3.50 for every $100 over $75,000, with the applied cost rising as property value increases.
When does stamp duty need to be paid?
Typically, it is mandatory that stamp duty is paid within 30 days of the real estate transaction, or within 30 days of settlement of the property. If you have hired a property conveyancer, they will often be able to assist you with organizing stamp duty payment to be made on our behalf to the State Revenue Office.
If I’m the vendor of the property, do I also have to pay stamp duty?
No, stamp duty is only paid by the purchaser of a property.
Who do I speak to for more information about stamp duty?
Stamp duty can end up costing the purchaser of a property a great deal of money. Always seek expert advice if you’re not sure how stamp duty applies to you. An experienced property conveyancer will be able to guide you through the property transaction process, including assisting you with answering specific questions around the payment of stamp duty and managing the paperwork involved. Don’t have a property conveyancer yet? Visit Jim’s Property Conveyancing in Melbourne or Property Conveyancing Brisbane, or phone 13 15 46 for expert assistance.
