Stamp duty can end up being one of the biggest upfront costs you pay when buying a property. As stamp duty is calculated according to the value of the property being purchased, it can climb particularly high if you’re buying property in Melbourne where CoreLogic says the median house price is around $750,000 and units are around $540,000 (as at 31 December 2018). So when doing up a budget, it’s important to consider how much stamp duty you may need to pay, as it could potentially add up to tens of thousands of dollars.
What is stamp duty?
Stamp duty, or land transfer duty as it’s referred to in Victoria, is a government tax that’s most commonly imposed when you acquire property or, in other words, when property is transferred from one person to another. Stamp duty is charged by state and territory governments, so the rules on how it’s calculated will vary from place to place. However, a general rule is: the more expensive your property is, the more stamp duty you’ll need to pay.
Stamp duty is primarily determined by three major factors: the state or territory you’re buying the property in, the value of the property, and whether any concessions or exemptions apply. Let’s take a look at how stamp duty is worked out in Victoria.
How is stamp duty calculated in Victoria?
In Victoria, stamp duty is calculated by applying the duty rate, as set by the Victorian State Revenue Office (SRO), to your property’s sale price or its market value – whichever of the two is higher. The duty rate is calculated on a sliding scale. For example, a rate of 1.4% applies to properties valued at $25,000 and under, while a rate of 5.5% applies to properties valued more than $960,000.
For foreign purchasers acquiring residential property, an additional duty is imposed on top of the stamp duty payable. For contracts made on or after 1 July 2016, this additional rate is 6%.
Get an idea of how much stamp duty you’re likely to pay in Victoria with our Stamp Duty Calculator. Select VIC from the dropdown menu to get started.
Who has to pay stamp duty in Victoria?
According to the SRO, approximately 200,000 properties change hands in the state each year. While most of these properties are sold at auction or through private sales, some are acquired by way of a gift or trust. Whatever way property is obtained, if you’re buying or acquiring property (whether for residential, commercial or investment purposes) the SRO indicates that you’ll need to pay stamp duty on it unless any exemptions apply.
When is stamp duty paid in Victoria?
The SRO advises that for properties purchased in Victoria, stamp duty must be paid within 30 days of settlement. If you fail to pay on time, the SRO says you may be charged with penalty tax and interest. This can be a significant amount – interest is charged at the market rate plus the premium rate of 8% per annum for underpayment, late payment or non-payment of tax. Meanwhile, penalty tax can sometimes be even more expensive – in some circumstances, for example where there’s an intentional disregard of the law and hindrance of an investigation, it can be up to 90% of the amount owing.
Your solicitor or conveyancer may be able to assist you with completing and lodging stamp duty documents and advising you on key deadlines specific to your transaction.
What stamp duty concessions and exemptions apply in Victoria?
First home buyers may be eligible for an exemption, concession or reduction of stamp duty. According to the SRO, if you enter into a contract to buy your first home on or after 1 July 2017, you may be eligible for the first home buyer exemption if your home is valued at $600,000 or less. Alternatively, if your home is worth between $600,001 and $750,000, you may be eligible to receive the first home buyer concession, meaning that you will pay a lower rate of stamp duty than you would if you weren’t eligible. The exemption or concession will apply regardless of whether you are buying a new or established home.
To be eligible, you (and your spouse or partner if applicable) must meet all of the following requirements:
- Never received the First Home Owner Grant previously;
- Never owned a home or other residential property in Australia prior to 1 July 2000;
- Never lived in a home in Australia that either of you owned or part-owned on or after 1 July 2000, for a continuous period of at least six months;
- Be at least 18 years old at settlement or completion of construction;
- At least one of you must be an Australian citizen or permanent resident; and
- At least one of you must live in the property as your principal place of residence for a continuous period of 12 months, starting within 12 months of settlement (if you are a member of the Australian Defence Force and enrolled to vote in Victoria, you may be exempt from this requirement in some cases).
Alternatively, if you purchased your home before 1 July 2017 and fulfilled the other requirements listed above, you may have been eligible to receive a stamp duty reduction of 50%.
If you’re buying a home to live in but it’s not your first property, you may be eligible to receive the principal place of residence concession. This concession is available to home buyers whose property is valued up between $130,000 and $550,000.
To be eligible you must meet both of the following requirements:
- You must start using the property as your primary place of residence within 12 months of settlement;
- You must live in the property for a continuous period of 12 months.
The SRO advises that there are a number of additional stamp duty concessions and exemptions available. Others include:
- Deceased estate – exemption for property transfers in accordance with the terms of the deceased’s will.
- Spouse and partner – exemption for some residential property transfers between partners and spouses where there is no payment involved. This can include transfers resulting from a relationship breakdown.
- Off-the-plan – concession potentially available if you are eligible for either the first-home buyer exemption/concession or the principal place of residence concession and are buying an ‘off-the-plan’ land package or a refurbished lot.
- Pensioners – one-off stamp duty exemption or concession when you buy a new or established home valued up to $750,000 to live in as your principal place of residence. You must also have an eligible concession card and pay market value for the property.
- Young farmers – one-off exemption or concession for young farmers buying their first farmland property
Other fees and finance considerations when buying property in Victoria
Other related fees
On top of stamp duty, you’ll also need to pay a mortgage registration fee (if you’re buying with a home loan) and a transfer on sale registration fee. The mortgage registration fee is a charge for registering a home loan and the property as security on that loan. The transfer on sale registration fee covers the cost of transferring the title of the property. The Victorian Government sets the fees each financial year. The mortgage registration fee is charged as a flat fee ($108 at the time of writing, according to Canstar’s stamp duty calculator) while the transfer on sale registration fee is calculated based on the value of your property. Check the Victorian Government website for current fees.
First Home Owners Grant
If you’re buying or building a new home, you may be eligible to receive the Victorian First Home Owner Grant. If you’re eligible and you’re buying a home in regional Victoria, you will receive a $20,000 grant. If the home is not in regional Victoria, the grant is $10,000. A list of areas considered to be part of regional Victoria is available on the SRO website. While you may be able to claim both the First Home Owner Grant and the first home buyer stamp duty concession or exemption, keep in mind that each have their own different eligibility requirements.
Stamp duty by Australian states and territories
Find out how much stamp duty you pay in different states and territories:
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