If you’re buying a property in Australia, you’ll have to pay stamp duty on top of the purchase price. So what exactly is stamp duty and how can you work out how much you’ll be paying?
What is stamp duty?
Stamp duty is a tax imposed on certain documents or transactions, including property sales. Because it is levied by the state and territory governments, the rate of tax you pay will vary depending on where the transaction takes place. For instance, if you buy a property for $500,000 in NSW, you can expect to pay a completely different rate of stamp duty on your purchase than if you bought an equally priced home in Victoria.
Stamp duty originated as a tax on legal documents including cheques, receipts and marriage licences – all of which had to be stamped to indicate the tax had been paid before they were legally effective. It was literally a fee paid for someone to rubber stamp a document.
In modern times, the tax has evolved to be more of a transaction duty, charged on the purchase of major assets like properties, cars, business assets, gifts and some types of insurance.
When do I need to pay stamp duty?
For property purchases specifically, the buyer must pay stamp duty within 30 days of settlement, and if your lender is taking a mortgage over the property you are purchasing, stamp duty will generally need to be paid before settlement. Depending on your circumstances, there may be concessions available on the amount of stamp duty you pay. Again, this varies between each state and territory. Penalties apply to late payments of stamp duty.
It’s really important to factor stamp duty into your budget when purchasing property. Unless you’ve asked for it, the stamp duty amount will not be included in any pre-approved loan from a lender. You’ll need to have the stamp duty saved, along with your deposit.
How much stamp duty will I have to pay?
Each state and territory has its own system for levying stamp duty, which is generally a sliding scale based on the value of the property you’re buying.
While the rate varies, the actual amount can be substantial: In NSW you will pay around $27,000 stamp duty on a $700,000 house, which shoots up to $37,000 in Victoria.
If you’re thinking of buying a property and want to understand more about your stamp duty obligations, Choice Home Loans can help. Our experienced brokers know their local markets and can help you factor all of your additional purchase costs into your budget.
Contact a Choice Home Loans broker
Find a broker
Use our broker services search tool to find brokers available in your area
This article is written to provide a summary and general overview of the subject matter covered for your information only. Every effort has been made to ensure the information in the articles is current, accurate and reliable. This article has been prepared without taking into account your objectives, personal circumstances, financial situation or needs. You should consider whether it is appropriate for your circumstances. You should seek your own independent legal, financial and taxation advice before acting or relying on any of the content contained in the articles and review any relevant Product Disclosure Statement (PDS), Terms and Conditions (T&C) or Financial Services Guide (FSG).