Understanding how stamp duty applies to your property purchase is important when deciding how much you can afford. Here we’ll answer some common questions about what stamp duty is and how it’s paid.
What is stamp duty?
Stamp duty is a government tax on certain transactions. You generally need to pay it when you buy a motor vehicle, insurance policy or real estate. Stamp duty on a property can also be known as “land transfer duty”.
The amount of stamp duty that applies to a transaction varies depending on where you live, the type of transaction taking place, and its value.
How much stamp duty do I have to pay?
Different stamp duty charges apply depending on where you live in Australia. By using an online Stamp Duty Calculator you can see exactly how much stamp duty applies to the property you plan to purchase. The amount you need to pay may also depend on:
- the type of property you are buying, i.e., a primary residence or investment property
- whether or not you’re a first home buyer
- whether you’re purchasing an established home, new home or vacant land, and
- whether you’re classified as a foreign purchaser.
When do I have to pay stamp duty?
When buying a property, you’ll generally need to pay stamp duty within 30 days of settlement. Your conveyancer or solicitor will usually organise to pay your stamp duty on your behalf to your State revenue office.
Can I add stamp duty to the cost of my loan?
Because stamp duty is an upfront cost, it can’t be covered by your home loan. If paying stamp duty means you no longer have a 20% deposit, you may have the option of paying for lenders mortgage insurance (LMI) to cover the cost of your loan.
Who is exempt from stamp duty?
Certain types of buyers may be entitled to a stamp duty exemption depending on where they live, whether they’re first home buyers and where the property they’re buying is located. For example, both Victoria and NSW have recently abolished stamp duty for first home buyers purchasing properties valued up to a certain amount.
Check your local State or Territory government website for the latest information on which exemptions apply to your situation.
Which other costs do I need to factor in?
There are a number of other upfront costs to factor in when planning to buy a property, including:
- pest and building inspections
- legal/conveyancing fees
- bank fees
- lenders mortgage insurance, and
- moving and repair costs.
For buyers who are focused on saving their deposit, these extra costs can come as a surprise. Take the time to research home buying costs in your state or territory and discuss them with a lending expert when putting your budget together.