5 October 2019

The home buyer’s guide to stamp duty

Pat Carbone
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Stamp duty, otherwise known as land transfer duty, is one of the largest extra expenses when buying property – often costing in excess of $20,000 or even $30,000. It’s usually payable shortly after you purchase your property so if you don’t plan for it you could find yourself in a serious jam.
To make sure you know exactly what to expect check out our homebuyers guide to stamp duty.

WHAT IS STAMP DUTY?

Stamp duty is a state tax on the purchase of property, vehicles, and business assets. Centuries ago stamp duty was a stamp on important documents that proved you had paid tax, and while the process is completely different now, the name has stuck.

HOW MUCH WILL I HAVE TO PAY?

The amount of stamp duty you have to pay depends on the state you live in, the purchase price of the property and the type of property you buy. Generally a higher purchase price attracts a higher stamp duty, while buying vacant land usually means a smaller stamp duty than an established property.

As a rough guide, if you buy a $500,000 home to live in and you are not a first home buyer, you can expect to pay approximately:

  • ACT: $13,842
  • NSW: $18,318
  • NT: $24,213
  • QLD: $ 8,524
  • SA: $25,141
  • TAS: $18,574
  • VIC: $23,350
  • WA: $18,183

Usually you will need to calculate the cost of stamp duty in your area when you’re buying, then add it to the purchase price. It’s always best to work this out and plan for it as far in advance as possible.

WHEN WILL I NEED TO PAY?

Depending on which state you’re buying in, you’ll have to pay stamp duty either on settlement day or within 3 months:

  • ACT: an application must be submitted to Canberra Access within 14 days of settlement. Once the buyer receives a Notice of Assessment back they have 14 days to pay.
  • NSW: within three months of settlement.
  • NT: within 60 days of settlement.
  • QLD: within 30 days of settlement.
  • SA: on or before settlement day.
  • TAS: within three months of settlement.
  • VIC : within 30 days of settlement.
  • WA: buyers have two months after settlement to apply for a Duties Assessment Notice through the state’s revenue office. Once they receive this they have one month to pay.

If you don’t pay on time, most state governments will apply penalty interest to the payment to be calculated on a daily basis. Because the stamp duty amount is so large and interest is calculated daily, it’s in your best interest to ensure your stamp duty is paid on time.

CAN I ROLL STAMP DUTY INTO MY LOAN?

Most lenders prefer that you pay stamp duty with your own funds, and it’s usually better to do this if you can manage it. Assuming you have a 3% interest rate and a 30 year loan term, rolling a $20,000 stamp duty into your loan could cost you over $10,000 in extra interest payments over the life of the loan.

However, if you’re prepared to wear the extra cost, some lenders will allow you to include stamp duty in your home loan if you meet other lending criteria.

CAN I AVOID PAYING STAMP DUTY?

Most purchasers have to pay full stamp duty. However, some buyers may be eligible for exemption or concessions. These include:

  • First home buyers.
  • Buyers who purchase homes below a certain value in some states.
  • Pensioners or health card holders.
  • Family farms and young farmers in some states.
  • Off the plan sales.

If you fit any of these descriptions check with your state office to confirm whether you’re eligible for a stamp duty concession or exemption.

Buying a home is a costly exercise and stamp duty only makes it more expensive. With that said, if you understand stamp duty and plan for it in advance there’s absolutely no reason why it should put a spanner in the works of your home buying dreams.

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