What Is Stamp Duty?

Stamp duty is paid by the buyer, not the seller, at the time of settlement of a property purchase. This could be anywhere from 14 days to 100 days after contracts are exchanged – it depends on the contract.

If you buy off-the-plan and intend to live in the property, it may be possible to delay paying stamp duty for up to a year of signing the contract.

The amount of stamp duty varies dramatically from state-to-state. There are stamp duty calculator available online to determine what applies in your area.

As an example, however: in Victoria the stamp duty costs are calculated as follows.

Source: Loans.com.au

According to financial planner, mortgage broker and founder of Master Your Money Now, Chris Carlin, the “rules for stamp duty exemption vary quite dramatically from state to state”.

Exemptions apply in certain states for healthcare card holders, Indigenous people, pensioners, or even farmers.

There is also an exemption for first home buyers, with caps on the sale price.

First home buyers’ exemption

In Victoria, a first home buyer is exempt from paying stamp duty if the property is $600,000 or less, and it’s tapered for properties up to the value of $750,000

A similar scheme exists in other states, and the caps typically reflect local real estate prices. For example, in New South Wales where property prices are highest nationally, there is a cap of $800,000 and a tapered exemption for properties up to $1,000,000.

“Unfortunately, if you’re in Northern Territory or South Australia, there is no first home exemption for stamp duty,” notes Carlin.

The amount of stamp duty being collected by state governments is at an all-time high. Data from the Australian Bureau of Statistics (ABS) showed a record high of $23.970 billion during 2020-21, which was a 7.6% increase on the year before.

However, there are moves afoot to abolish stamp duty in New South Wales and Victoria as a way of helping people to get on the property ladder faster, as stamp duty is one of the biggest up-front costs.

Some property experts also contend that stamp duty stops people upgrading: afterall, it is often cheaper to renovate than buy another house and pay tens of thousands in stamp duty, and this leads to limited stock on the market and potentially higher prices.

In New South Wales, the government has introduced legislation that would give those who purchase a home for $1.5 million or less the option to pay stamp duty upfront or to pay an annual land tax. This would take effect for buyers from 16 January 2023. The land tax would be at the rate of $400 per year, plus 0.3% of the land value, and it would need to be paid every year. It is therefore likely to be more than if stamp duty was paid upfront as a one-off cost.

Those who purchase a property worth more than $1.5 million would still be required to pay stamp duty up-front.

The details of such a substantial reform are likely to be the subject of debate, and further compromises may be made.

Victoria has a similar proposal in the wings, but is adopting a wait-and-see approach in relation to New South Wales, says Carlin.

“Governments want to help people get into the property market and stamp duty can be a factor in preventing people from doing so,” he says. “However, the flipside is that removing stamp duty is likely to push property prices up. That has happened in New Zealand, where there is no stamp duty.”

Carlin would like to see the thresholds for the exemptions raised, as the upper limit of of $600,000 in Victoria was set back in 2014. Property prices have increased substantially since then, which means that only a minority of first home buyers can take advantage of the scheme.