Understanding stamp duty
There’s a lot to consider when buying property. Including, plenty of fees and costs that can sometimes be unexpected - one of the most misunderstood fees being stamp duty.
With the help of Hockingstuart’s Head of Growth, Nick Boyd, we have pulled together some frequently asked questions and answers to help you with the ins and outs of stamp duty.
Get across what it means, and how much it costs, so you can minimise any surprises during your home buying journey.
What is stamp duty?
Property stamp duty, also known as land transfer tax, is a state or territory Government tax that is payable when you purchase a home. The payment is paid on top of the purchase price by the home buyer and varies depending on where you live, the type of purchase, and the property’s value.
How much does stamp duty cost?
The amount of stamp duty that will be paid depends a range of factors that are independent to each settlement and may include:
- The state or territory in which you are buying the property.
- The type of property, like a primary residence or investment property.
- Whether or not you’re a first home buyer.
- Whether you are purchasing an existing home, new property or block of land.
- Whether you are an overseas purchaser.
“With so many factors at play, a good tip is to check out a stamp duty calculator available online,” says Nick.
“You can also get in touch with a financial advisor to see exactly what you can expect to pay.”
When does stamp duty have to be paid?
When purchasing a property, you will generally need to pay stamp duty around the 30-day settlement period.
“It’s important to remember that every state and territory has different time periods for the payment of stamp duty, so if you are managing your own finances, make sure you know the exact timings to avoid any surprises,” says Nick.
“If you are working with a conveyancer or solicitor, they will organise the stamp duty payment process on your behalf, so that can be an easier option,” Nick adds.
Do I have to pay stamp duty if I am a first home buyer?
To encourage first home buyers to enter the property market, most states and territories offer concession or exemptions to eligible buyers purchasing their first property.
These concessions are subject to change depending on the value of the property and whether it is an existing property, new build or a block of land.
“Right now, there are lots of opportunities for first home buyers to avoid paying stamp duty. This year we have seen several changes by state Government to make buying a home more accessible, including NSW’s scrapping of stamp duty for eligible first home buyers,” says Nick.
“Make sure you check out the first home owner grant website to see if you are eligible for any concessions or exemptions that may apply.”
Can stamp duty be added on to a home loan?
As stamp duty is a Government tax and is required up-front when purchasing a property, you cannot include the cost into your mortgage repayments.
If the cost of stamp duty means you no longer have enough to cover a 20 per cent deposit for the property, there may be the option to pay Lenders Mortgage Insurance (LMI) to cover the cost of your loan.
“The best advice I can offer is to factor stamp duty into your budget from the beginning because it is one of the biggest costs you will have, above and beyond purchasing the property in the first place,” says Nick.
What other costs do I need to consider when buying?
As you can imagine, there is a long list of costs besides your deposit, stamp duty and home loan that you need to consider. These include:
- Pest and building inspections.
- Fees for your solicitor/conveyancer.
- Bank fees.
- Moving costs.
- Repair/renovation costs.
- If applicable, Lenders Mortgage Insurance (LMI).
“Buying a home will usually be the biggest purchase you will ever make, so you can imagine that hidden costs will pop up regardless of what kind of property you’re buying. Arm yourself with as much info as possible so you know what’s involved and can do your best to avoid surprises,” says Nick.