Stamp Duty Explained: What Every Buyer Needs to Know
Stamp Duty Explained: What Every Buyer Needs to Know
When budgeting for a property purchase, the deposit is often the first expense that comes to mind. However, buyers may also need to account for stamp duty, legal fees, inspections, lender fees and other upfront purchasing costs.
Stamp duty can represent a significant additional expense and may affect the amount of savings you need before purchasing.
The amount payable is not the same for every buyer. It can depend on the value of the property, how the property will be used, the buyer’s eligibility for available concessions and the rules that apply where the property is located.
Understanding stamp duty before making an offer can help you set a more realistic purchasing budget and avoid unexpected costs at settlement.
What Is Stamp Duty?
Stamp duty is a tax that may apply when property ownership is transferred from one person or entity to another.
Although it is commonly called stamp duty, it may also be referred to as:
Transfer duty
Land transfer duty
Property transfer duty
Conveyance duty
The terminology varies depending on the relevant revenue authority, but the general concept is the same.
Stamp duty is usually a one-off property purchasing cost rather than an ongoing annual charge. Moneysmart describes it as a state government property-transfer tax and notes that buyers need to include it when calculating the costs of purchasing a home.
Who Pays Stamp Duty?
The buyer, or person acquiring the property, will generally be responsible for paying the stamp duty.
This may include:
Someone purchasing their first home
An existing homeowner purchasing another property
A property investor
Someone purchasing vacant land
A company or trust acquiring property
A person receiving property through certain ownership transfers
Someone purchasing an interest or share in a property
Stamp duty may still apply even where the property is not being purchased through a standard sale.
For example, duty may potentially apply when:
Property is transferred between family members
A person is added to or removed from a property title
Ownership is transferred following a relationship change
A property is transferred into or out of a trust
A buyer receives property as a gift
An ownership interest is transferred for less than market value
Exemptions or concessions may be available for certain transfers, but they are not automatic. Buyers should obtain legal advice before changing property ownership or entering into a non-standard transaction.
How Is Stamp Duty Calculated?
Stamp duty is generally calculated using the property’s dutiable value.
In many cases, the dutiable value is the higher of:
The purchase price agreed between the buyer and seller, or
The property’s market value
This means purchasing a property from a relative or receiving it as a gift does not necessarily remove the stamp duty obligation.
If a property has a market value of $700,000 but is transferred for $500,000, the revenue authority may calculate duty using the $700,000 market value rather than the discounted transfer price.
Government revenue authorities commonly calculate dutiable value using the greater of the purchase price and the property’s market value.
What Factors Affect the Amount of Stamp Duty?
The exact amount of stamp duty can depend on several factors.
These may include:
The property’s purchase price
The property’s market value
Whether the property will be your principal home
Whether the property will be used as an investment
Whether you are a first-home buyer
Whether you are purchasing an established home
Whether you are purchasing a newly constructed property
Whether you are purchasing vacant land
The date the contract is signed
The type of buyer acquiring the property
The buyer’s residency or citizenship status
Whether a concession, exemption or surcharge applies
The location of the property
Stamp duty is commonly calculated using a sliding scale. As the dutiable value of a property increases, the amount of duty will generally increase.
Some jurisdictions may also apply different rates, concessions or additional surcharges depending on the buyer and the intended use of the property.
Because rates and thresholds can change, an online estimate should not be treated as a final assessment.
A Simple Stamp Duty Example
Assume a buyer is purchasing a property for $750,000.
The stamp duty calculation may consider:
The $750,000 purchase price
The property’s market value
Whether the buyer will live in the property
Whether the buyer is purchasing their first home
Whether any concession or exemption applies
The contract date
The buyer’s individual eligibility
Two buyers purchasing properties for the same price may not necessarily pay the same amount of stamp duty.
For example, an eligible first-home buyer purchasing a principal residence may receive different treatment from an investor purchasing a property at the same price.
This example is for general illustration only. It does not provide an estimate of the duty payable by a particular buyer.
When Is Stamp Duty Paid?
Stamp duty is generally paid as part of the property settlement process, although the exact payment deadline can vary.
Your conveyancer or solicitor will usually:
Calculate or confirm the estimated duty
Determine whether you may be eligible for a concession
Prepare the required documents
Arrange payment to the relevant revenue authority
Include the amount in your settlement calculations
It is important to have the required funds available before settlement.
Stamp duty is generally separate from the deposit paid to the real estate agent and separate from the deposit or equity required by the lender.
Moneysmart notes that stamp duty is typically payable within a specified period around settlement, although the exact deadline depends on the applicable requirements.
Is Stamp Duty Included in the Property Deposit?
No. Stamp duty and the property deposit are separate costs.
For example, if you are purchasing a $700,000 property with a $70,000 contribution towards the purchase price, you may still require additional money for:
Stamp duty
Conveyancing or legal fees
Building and pest inspections
Loan application or settlement fees
Property valuation costs
Title registration and transfer fees
Adjustments for rates or other property expenses
Moving expenses
Any applicable Lenders Mortgage Insurance
An emergency savings buffer
Having savings equal to 10% of the property price does not necessarily mean you have a complete 10% deposit available.
Part of those savings may be needed to cover stamp duty and other purchasing expenses.
Can Stamp Duty Be Added to a Home Loan?
Stamp duty is not generally treated as a separate loan product. However, the overall amount you borrow may affect how much of your available savings can be retained for stamp duty and other purchasing costs.
Whether this is possible will depend on:
The property value
The proposed loan amount
Your available deposit
Your loan-to-value ratio
Your borrowing capacity
The lender’s maximum lending limits
Whether Lenders Mortgage Insurance applies
The lender’s credit policies
For example, a borrower with a larger deposit may decide to contribute less of that deposit towards the property price and retain some funds for stamp duty.
However, borrowing more can result in:
A higher loan-to-value ratio
Increased repayments
More interest over the loan term
A higher Lenders Mortgage Insurance premium
Additional lending conditions
Reduced equity in the property
A lender will still need to be satisfied that the overall loan is affordable and meets its lending requirements.
Do First-Home Buyers Pay Stamp Duty?
First-home buyers may be eligible for a stamp duty exemption, concession or reduced rate.
Eligibility may depend on factors such as:
The value of the property
Whether the property is new or established
Whether vacant land is being purchased
Whether the buyer has previously owned property
Whether all purchasers meet the eligibility requirements
Whether the buyer will live in the property
How soon the buyer moves into the property
How long the property is occupied
The date of the purchase contract
Some first-home buyers may pay no stamp duty, while others may receive only a partial reduction.
Once a property exceeds an applicable value threshold, the concession may reduce gradually or stop completely.
Thresholds and eligibility conditions can change. Buyers should confirm the current requirements with their conveyancer, mortgage broker or relevant revenue authority before relying on a concession.
Is a First-Home Buyer Concession the Same as a First-Home Owner Grant?
No. A stamp duty concession and a first-home owner grant are separate forms of assistance.
A stamp duty concession or exemption reduces or removes the transfer duty that would otherwise be payable.
A first-home owner grant is a payment available to certain eligible buyers, usually subject to requirements concerning the buyer, property type and property value.
A buyer may potentially:
Qualify for both
Qualify for one but not the other
Be ineligible for both
Eligibility for one program does not automatically confirm eligibility for another.
It is also important not to assume a grant will be available to pay the deposit or other costs before settlement. The timing and use of any payment will depend on the program and application process.
Does Stamp Duty Apply to Investment Properties?
Stamp duty generally applies when purchasing an investment property.
Investment property buyers may not qualify for the same principal-residence or first-home buyer concessions that may be available to eligible owner-occupiers.
When budgeting for an investment property, buyers should consider expenses such as:
Stamp duty
The deposit
Lenders Mortgage Insurance where applicable
Conveyancing and legal fees
Building and pest inspections
Property management fees
Insurance
Council rates
Owners corporation fees
Repairs and maintenance
Periods without rental income
Moneysmart identifies stamp duty and legal fees as significant entry costs associated with purchasing an investment property.
Is Stamp Duty Tax Deductible on an Investment Property?
Stamp duty paid to acquire an investment property is generally considered a capital purchasing cost rather than an immediately deductible rental expense.
It may form part of the property’s cost base when calculating a future capital gain or loss.
The tax treatment can depend on the type of duty, the transaction and the buyer’s circumstances. The ATO includes stamp duty among acquisition costs that may form part of a property’s capital gains tax cost base.
Buyers should obtain advice from a registered tax agent or suitably qualified tax professional before relying on a particular tax treatment.
Does Stamp Duty Apply to Vacant Land?
Stamp duty may apply when purchasing vacant land.
The duty may be calculated using the value of the land rather than the combined cost of the land and a separate future building contract.
However, the treatment can depend on:
The structure of the transaction
Whether the land and construction are covered by separate contracts
The contract date
The buyer’s intended use
Whether the buyer qualifies for a first-home or principal-residence concession
Whether construction must begin within a required period
Whether occupancy requirements apply
Buyers planning to build should obtain advice before signing contracts, particularly where their eligibility for a concession depends on future construction or occupancy.
What About Off-the-Plan Purchases?
An off-the-plan purchase involves entering into a contract before construction has been completed.
Some off-the-plan purchasers may qualify for a concession that reduces the value used to calculate stamp duty. This may recognise construction work that occurs after the buyer signs the contract.
However, off-the-plan concessions can be subject to strict:
Property value limits
Contract dates
Construction requirements
Occupancy rules
Buyer eligibility conditions
Application deadlines
An off-the-plan purchase does not automatically result in reduced stamp duty.
Buyers should have the contract reviewed by a solicitor or conveyancer and confirm any potential concession before relying on it in their purchasing budget.
Can Stamp Duty Apply When Refinancing?
Refinancing an existing home loan does not usually involve purchasing the property again, but some duties, registration costs or government charges may still potentially apply depending on the transaction and loan structure.
Additional considerations may arise where:
Ownership of the property is changing
A borrower is being added to or removed from the title
The property is being transferred to another person or entity
A trust or company is involved
The refinance is connected with a relationship or estate settlement
New security arrangements are being established
Buyers and homeowners should obtain legal advice where a refinance involves changes to property ownership.
Are Property Transfers Between Family Members Exempt?
Not necessarily.
Stamp duty may apply when property is transferred between:
Parents and children
Siblings
Spouses or partners
Other relatives
Individuals and family trusts
Individuals and companies they control
This may be the case even when:
No money changes hands
The property is gifted
The transfer price is below market value
The parties have agreed privately that no duty should apply
The revenue authority may assess duty using the property’s market value.
Certain exemptions may apply to specific relationship breakdowns, deceased estates, transfers between spouses or other prescribed circumstances. Eligibility will depend on the applicable rules and evidence provided.
Independent legal and tax advice should be obtained before transferring property between related parties.
Can Stamp Duty Change After Contracts Are Signed?
The amount payable can be affected by the rules and rates that apply to the transaction date.
Stamp duty may also be reassessed if:
Incorrect information was provided
The property’s market value was understated
The buyer does not satisfy an occupancy requirement
A concession was claimed but the eligibility conditions were not met
The property’s use changes within a required period
The transaction is varied, assigned or nominated to another purchaser
An ownership structure changes before settlement
Additional duty, penalties or interest may apply where an incorrect concession has been claimed.
Buyers should notify their conveyancer or solicitor if their circumstances or intended use of the property changes.
How Stamp Duty Affects Your Buying Budget
Stamp duty reduces the amount of savings available to contribute towards the property price.
For example, assume you have saved $100,000.
That amount may need to cover:
Your contribution towards the purchase price
Stamp duty
Legal and conveyancing costs
Property inspections
Loan and government fees
Moving costs
An emergency buffer
After accounting for these expenses, your actual contribution towards the property price may be significantly less than $100,000.
This could affect:
Your maximum property budget
The amount you need to borrow
Your loan-to-value ratio
Whether Lenders Mortgage Insurance applies
Your home loan repayments
Your eligibility under the lender’s policies
This is why stamp duty should be estimated early rather than after you have made an offer.
Common Stamp Duty Mistakes
Only saving for the deposit
Buyers sometimes calculate their savings based only on a percentage of the property price and forget to allow for stamp duty and other purchasing costs.
Assuming every first-home buyer pays no duty
First-home buyer concessions generally have eligibility requirements and property value limits.
Relying on an outdated online calculator
Stamp duty rates, thresholds and concessions can change. Use a current calculator from the relevant revenue authority and confirm the estimate with your conveyancer.
Assuming the purchase price is always used
If the market value is higher than the amount being paid, duty may be assessed using the market value.
Assuming family transfers are duty-free
Transfers between related parties may still attract duty, even where the property is gifted.
Making an offer before calculating total costs
A property may appear affordable based on the purchase price but exceed your available budget once stamp duty and other expenses are included.
Questions to Ask Before Purchasing
Before signing a property contract, consider asking:
What is the estimated stamp duty for this property?
What dutiable value will be used?
Do I qualify for a concession or exemption?
Are there property value limits?
Are there occupancy requirements?
When must the duty be paid?
Will the payment be arranged through settlement?
How much will I have left for my deposit after paying purchasing costs?
Will my deposit result in Lenders Mortgage Insurance?
Could a lower lender valuation affect the funds I need?
Are there additional charges based on the type of buyer or ownership structure?
Could the transaction have tax or legal implications?
What happens if my circumstances change before or after settlement?
Have I allowed for legal fees, inspections and an emergency buffer?
How Can a Mortgage Broker Help?
A mortgage broker does not calculate or provide legal advice about your final stamp duty liability. However, a broker can help include the estimated amount in your broader purchasing budget.
Homefront Mortgages can assist by:
Reviewing your available deposit and savings
Estimating your total funds required
Helping you understand how purchasing costs affect your deposit
Calculating your proposed loan-to-value ratio
Explaining whether Lenders Mortgage Insurance may apply
Comparing suitable home loan options available through our lender panel
Reviewing indicative repayments
Helping prepare and submit your loan application
Working with your conveyancer or solicitor throughout the purchasing process
Your conveyancer, solicitor or revenue authority should confirm your final stamp duty amount and eligibility for any concession or exemption.
Speak With Homefront Mortgages
A property’s purchase price is only one part of the total amount you may need.
Homefront Mortgages can help you assess your deposit, estimated stamp duty, other purchasing expenses and proposed loan amount before you begin making offers.
We can compare suitable home loan options available through our lender panel and help you understand how your available funds may affect your borrowing position, repayments and loan-to-value ratio.
We do not represent every lender or home loan available in the market. The final decision to approve a loan, including the loan amount, interest rate and applicable conditions, is made by the lender.
Important Information
This article provides general information only and does not constitute personal financial, credit, tax or legal advice. It does not take into account your objectives, financial situation or individual needs.
Stamp duty rates, thresholds, concessions, exemptions, surcharges, eligibility requirements and payment deadlines vary depending on the location and circumstances of the transaction and may change.
Before entering into a property transaction, obtain advice from a qualified conveyancer, solicitor, registered tax agent or other suitably qualified professional. Confirm current stamp duty information with the relevant revenue authority.
Loan approval is subject to lender assessment, eligibility requirements, satisfactory documentation, property valuation and applicable lending criteria. Interest rates, fees, terms and conditions may change. Fees and charges may apply.
Any figures or examples in this article are illustrative only and do not represent a stamp duty assessment, financial recommendation, loan approval or offer of finance.
