Stamp Duty: Questions and Answers

When buying a home in Australia, it’s very important to consider stamp duty. Stamp duty is a tax levied by states and territories on transactions such as mortgages, land purchase, business asset transactions and, of course, home purchases. Stamp duty is paid to the lender during the loan process and is paid on the actual property as part of the purchase price. Careful consideration must be given to stamp duty since it can add a significant amount to the purchase. Depending on location and home’s value, stamp duty could be 1.25 to 6.75% of the value of the home plus a flat fee that can range from hundreds to tens of thousands of dollars.

For unaware home buyers, stamp duty can be a hidden cost that adds quite a surprise to the bottom line on a home purchase. Proper planning for stamp duty fees is essential. Buyers need to know how much they are expected to pay in stamp duty, how to budget for this possibly large expense, what concessions are available that could lessen the hit on their purse, and what resources can be used to demystify this issue to be better prepared for the purchase. This guide will answer these and other questions about the complex issue of stamp duty.

What is stamp duty?
Simply stated, stamp duty is a tax on a purchase. In case of real estate, stamp duty is charged on the loan and on the property. More information on What is Stamp Duty

I am purchasing a new home. How do I budget for stamp duty?

To be safe, home buyers should budget about 1.25 to 6.75% of the purchase price for stamp duty on the loan, but the best way to begin budgeting is to contact your lender. The bank will have the particulars of your loan and can calculate the stamp duty amount based on the home’s value and the location. Your lender will also know of any concessions available, such as those for first-time buyers, which could lower the overall duty amount. Once the bank has calculated this, you will have a much better idea of how much you need to plan have available for all stamp duty costs.

When is stamp duty paid on the home purchase?

In the actual purchase of the property, stamp duty is factored directly into the home’s purchase price. For example, on a loan of $300,000 and a stamp duty of $7,000, the full loan amount for the home is $307,000. The advantage of this is that this will be the amount of the loan, so while stamp duty essentially raises the “cost” of the home, it is paid over time as part of the loan. The disadvantage is that, considering interest over the life of the loan, stamp duty rolled into the purchase price and loan amount actually works out to be higher than the “true” amount of the stamp duty.

When is stamp duty paid during the loan process?

Stamp duty on the loan is paid immediately upon approval of the home loan. This is why it is very important to speak with your lender early in the process and properly budget for stamp duty. It is also crucial to keep in mind that the lender charges various other fees as well. This is where the “10%” mentioned earlier comes in.

How is stamp duty calculated?

Stamp duty is calculated based on several factors. It depends on the purchase price of the home, the state where the home is located and/or the state in which you are applying for the loan (if they differ), whether the home is new or is an already-existing property, whether you plan on make the home a residence or an investment property, and what, if any, concessions apply to the purchase. Stamp duty is both a percentage and a flat fee based on all these factors. It is also very important to note that the government charges mortgage registration and transfer fees, too.

Are concessions available for first-time home buyers?

Various concessions are available as an incentive for buyers, including concessions for first home buyers. Concessions can include rebates, lowered stamp duty rates, or even no stamp duty charged at all. These concessions vary from state to state, and specific information is available from each state’s Office of State Revenue.

What is a stamp duty calculator?

Stamp duty calculators are available online on various informational web sites, as well as sites run by lenders. While rates vary and there is no real way to know true stamp duties or total cost until actually meeting with a lender, a stamp duty calculator can give prospective buyers a good indication of the amount they can expect to pay for stamp duty on a loan. The features of online stamp duty calculators vary, but, for the most part, buyers can expect to enter the following information:

• State or Territory
• Value of property
• Loan amount
• Purpose of property (home or investment)
• Whether the applicant is a first-time homebuyer
• Type of property (new home, existing property, lot)

The stamp duty calculator then gives an estimate of the amount of stamp duty the buyer can expect to pay. The calculator may also list government fees and concession estimates as well.

When you are looking to buy a home, stamp duty is a vital factor to consider. As you weigh the factors above, it is important to research this issue locally and consult with a lender to get the most current information to see how stamp duty applies to you.