Stamp Duty 101: What to Know
If you’ve already started your research into the costs of buying a home, you’ve probably seen the term stamp duty floating around. It is the biggest upfront cost when purchasing property and can catch you out if you haven’t factored it into your budget for a deposit.
But what is it and how is it calculated?
According to the Australian Government, stamp duty is a tax on written documents and certain transaction imposed by each state and territory. Depending on where you are purchasing property, it might be called stamp duty, transfer duty or general duty.
It can be imposed on home loans, insurance and some gifts. In the case of real estate, stamp duty must be paid within 30 days of property settlement by the purchaser. The cost will vary depending where you’re purchasing and is usually based on the purchase price of the property. You will find that how much you pay will also be influenced by factors such as:
· If it will be your primary place of residence or investment property
· If it is an existing property, newly constructed or vacant land
· If you are a first home buyer
Generally, the more expensive the purchase price, the higher the stamp duty. For example, a $500,000 property in WA in June 2016 had an owner occupier/investment stamp duty of $17,765. Visit the WA Office of State Revenue and try out their stamp duty calculator to determine an estimate for how much stamp duty you might need to pay.
Where does stamp duty go?
Generally, the state government invests the money collected from stamp duty into the economy. It goes towards state government budgets specifically to be used for health, transport and roads, police, emergency services, education, human services, environment and water.
Fun Fact: Stamp duty was historically a fee for the physical stamp attached to documents drawn up for the transaction of land, marriage licenses and military commissions, etc…
Are there exemptions or concessions available?
Exemptions from stamp duty are available under extreme circumstances only, such as a death of the property owner or joint tenant. However, there are situations that don’t require the payment of stamp duty, including; the transfer of ownership between spouses or a change of tenure. A change of tenure refers to changing from joint tenants to tenants in common, and the exemption applies if both owners hold equal share of the property after the change.
In WA, the First Home Owner Rate of Duty has the potential to reduce the stamp duty payable, depending on your circumstances. The First Home Owner Rate of Duty can apply if the home buyer is eligible for the First Home Owner Grant (FHOG) and if the value of the property is below certain thresholds. According to the WA department of communities and housing, as of July 2014, the First Home Owner Rate of Duty applies to properties with a value of up to $530,000 for house and land or $400,000 for vacant land.
Need more information?
Give us a call on (08) 9417 3399 to speak to one of our brokers. They’ll be happy to explain the ins-and-outs of stamp duty and answer any questions you may have.
At Select, we make finance simple.