Buying a property can be an overwhelming process. Once you have found the right place, you then have to deal with the mechanics of buying it. Then comes an avalanche of paperwork.
Throughout the process, buyers need to remember all the different fees they will need to pay – from state government charges to legal fees.
But if you are prepared, those unavoidable extras won’t be quite as big a shock on settlement day. The biggest of those fees is usually stamp duty, a tax levied by all states and territories.
What is stamp duty?
This is a tax a buyer pays on buying a property. It is calculated as a percentage of the purchase price, with the rate increasing as the property’s value does.
In some states or territories, this charge is called conveyancing duty, transfer of land duty or property transfer duty.
How much is stamp duty?
The tax is set by each state and territory, so the rates vary.
For example, a $750,000 property in Victoria will attract stamp duty of about $40,000. In Queensland, the equivalent charge would be about $20,000.
The amount depends on factors such as residency status, the value of the property and if you have owned a property before.
A quick way to estimate the likely amount is with a stamp duty calculator.
Who pays stamp duty?
The purchaser of the property. It must be paid upfront or within 30 days of settlement.
It is normally paid by direct deposit, bank transfer, credit card or cheque.
Are there any exemptions?
Stamp duty is usually unavoidable. There are some rare exemptions for exceptional circumstances, which can include the death of a property owner or joint tenant. In these situations, legal advice is required.
However, most states do offer concessions and limited exemptions for first-home buyers.
In Victoria, for example, first-home buyers will pay no stamp duty if the property is under $600,000. There’s also a concessional rate for properties between $600,000-$750,000. To be eligible, first-home buyers must live in the property for at least 12 months.
There’s a similar exemption in NSW for new homes valued up to $550,000. A reduced rate applies for first-home buyers purchasing homes valued between $650,000 and $800,000.
In its recent 2018 budget, the ACT wiped stamp duty altogether for first-home buyers with household incomes of less than $160,000.
What is the money used for?
Stamp duty goes into state government coffers and is invested into the Australian economy that way.
Common spending areas include transport, health and emergency services.
Is stamp duty on investment properties tax deductible?
Afraid not. Investment property acquisition costs and stamp duty paid at the time of purchase cannot be claimed as tax deductions.
However, the costs of buying a property can usually be added to its base cost when you sell it. This might reduce your capital gains tax liability. Legal and financial advice will again be crucial.