What is Stamp Duty? Everything You Need to Know

DG Institute
DG Institute

Published 3:01 am 28 Jun 2021

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If you are looking to get into the Australian housing market, whether for a residential home or an investment property, it is important to have a solid understanding of what stamp duty is.

Table Of Content

  1. What is stamp duty
  2. How much is Stamp Duty in your state
  3. When do i have to pay stamp duty
  4. Can i defer stamp duty payments
  5. Stamp duty exceptions and concessions during COVID-19
  6. Stamp duty for first home buyers
  7. Land tax & stamp duty: What’s the difference?

What is stamp duty?

Stamp Duty, also known as land transfer duty, is a mandatory tax levied by state and territory governments that you will need to pay when buying property, insurance, or a motor vehicle. Depending on which state you live in and how much your prospective property costs, you will likely be paying tens of thousands in stamp duty.

As such, you will need to know about stamp duty costs in your state when looking at your budget.

Stamp duty is not tax-deductible when buying a property, however, when selling or transferring a property, stamp duty can be claimed against Capital Gains Tax (CGT).

Additionally, stamp duty costs can differ in some states depending on whether you’re purchasing an investment property or a Principal Place of Residence (PPR).

In NSW, TAS, WA, ACT, SA and NT, the stamp duty is the same for a PPR and an investment property. In QLD and VIC, investment properties come with a higher stamp duty than a PPR.

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How much is Stamp Duty in your state?

Stamp duty costs will vary depending on which state your property is in and what the value of the property is. To give an example of stamp duty costs, below is the current New South Wales’ stamp duty relative to property costs.

NSW Stamp Duty:

Property Value Stamp Duty
$0-$14,000 $1.25% for each $100
$14,001 – $31,000 $175        +    $1.50 for each $100 over $14,000
$31,001 – $83,000 $430        +   $1.75 for each $100 over $31,000
$83,001 – $310,000 $1,340     +   $3.50 for each $100 over $83,000
$310,001 – $1,033,000 $9,285     +  $4.50 for each $100 over $310,000
Over $1,033,000 $41,820   +   $5.50 for each $100 over $1,033,000
Source: Home Loan Experts

If you’re looking to purchase a property in NSW valued at over $1.03 million, you will have to pay upwards of $41,820 in stamp duty. 

In fact, stamp duty can often be so costly that NSW Treasurer Dominic Perrottet called stamp duty “the biggest barrier to homeownership in Australia.”

This is precisely why it’s so important to understand the stamp duty costs in your state and how much you’ll have to factor into the price of a property. To help you learn how much stamp duty you might have to pay, you can use an online stamp duty calculator

There are additional factors that can influence how much stamp duty you have to pay such as whether the property will be a single residential dwelling block if it is off-the-plan/vacant land and whether it is your first property purchase. 

If you are a foreign resident, you will also have to pay a foreign citizen stamp duty surcharge, which typically ranges between an additional 7-8% on your existing stamp duty depending on which state the property is in. 

When do I have to pay stamp duty? 

The due date for stamp duty differs from state to state. For example, in NSW stamp duty must be paid within three months of signing a contract for the sale or transfer of property, unless you are buying an off-the-plan property that you intend to live in, in which case you may be able to defer the payment for up to 12 months.

If you are using a solicitor or conveyancer to purchase your property and they have lodged your assessment, they will receive a notice of assessment as well as the total tax you are required to pay and when it’s due. 

It’s important to pay your stamp duty on time, otherwise, you will be penalised and have to pay interest on the amount you owe your state government. 

Can I defer stamp duty payments? 

Unfortunately, stamp duty payments are generally unavoidable and will need to be paid shortly after signing your contract. You may, however, be eligible for a concession on the stamp duty you need to pay. You can read more on this in the following section.

Additionally, if you’re entering into a property option agreement, stamp duty typically isn’t paid at the time of the initial option agreement but is instead payable when the property is purchased at the end of the agreed term. 

Entering into a property option agreement allows developers to secure the purchase of a property without having to lay down all the money upfront, and may allow you to defer paying stamp duty until the end of your agreed term. 

Stamp duty exemptions and concessions during COVID-19

Depending on which state or territory you live in, you may be eligible for stamp duty concessions during coronavirus, so check your state government website to find out more.

Additionally, if you’re a first home buyer, you may be eligible for a stamp duty exemption depending on the price of the property and the state or territory you’re in.

Stamp duty for first home buyers

After the impact of COVID-19, many state governments implemented or expanded upon incentives for first home buyers to get into the property market. 

Generally, these incentives come in the form of grants and stamp duty concessions.

Many states offer a grant for first home buyers which is typically valued between $10,000-$20,000 to help with the purchase of a home – on the condition that the home is a newly-built property, below a certain price threshold. 

Additionally, states are now implementing new stamp duty concessions during COVID-19.

For example, the Tasmanian Government increased the stamp duty concession threshold from $400,000 to $500,000 in March this year for first home buyers. This means that if you purchase your first house in Tasmania, and it’s valued below $500,000, you are eligible for a 50% discount on your stamp duty. 

You can find out more about the grants and concessions your state offers here

Land tax & stamp duty: What’s the difference?

Land tax is an annual tax levied at the end of each calendar year on land that you own which is valued above your state’s land tax threshold. Your principal place of residence is exempt from land tax, however, you will most likely need to pay land tax on other properties you own.  

Land tax only looks at the value of the land itself and not the property value. 

For example: The threshold in NSW begins at $755,000. This means that if you own an investment property in NSW sitting on land that is valued above $755,000, you will need to pay $100 plus 1.6% of the land value exceeding $755,000. 

If your land is valued above $4.61 million, your property sits within a “premium” threshold, and will cost you $61,876 plus two per cent of land value above the threshold annually. 

These rates will vary from state to state, so be sure to check your state government website to determine how much land tax you’ll have to pay annually.

Additionally, land tax rates may become increasingly significant to first home buyers in NSW, as the NSW Treasurer Dominic Perrottet is hoping to give home buyers a choice between having to pay stamp duty within three months of purchasing their property, or a land tax that is paid annually. 

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Lawyer, Asset Protection Specialist and Property Educator

Dominique Grubisa is a practicing lawyer with over 25 years experience. She is a property investor and developer, an entrepreneur with businesses in Australia and Southeast Asia, a speaker, educator, writer and published author.

This column has been written for general information purposes only. It is not intended as legal, financial or investment advice and should not be construed or relied on as such.

About DG Institute

Founded in 2009, DG Institute strives to empower everyday Australians to grow and protect their wealth. Our goal is to provide direction, motivation and inspiration to our clients and help them perform at their very best. We do that through our professional services, in addition to teaching them how to grow their wealth through property and business education.

This column has been written for general information purposes only. It is not intended as legal, financial or investment advice and should not be construed or relied on as such.

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