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1. What is Stamp Duty?
Stamp duty is a tax that the state government imposes on the transfer of property. The amount varies between Australian states and territories and can be a significant expense, especially for high-value properties.
2. How is Stamp Duty calculated?
Stamp duty is calculated using a tiered system linked to a property’s value. As the property value increases, the stamp duty rate increases. Most states use a bracketed system where low-value properties have a lower stamp duty rate and higher-value properties come with a significantly higher rate.
The actual rates and brackets vary across states. The rates usually depend on factors such as property type, buyer status, and concessions (such as exceptions for first home buyers).
3. When do I pay Stamp Duty?
Stamp duty payment timelines vary by state. Typically, stamp duty is payable around settlement time, but some states allow payment after settlement (e.g., up to 30 days after settlement).
The settlement date is when you officially become the legal owner of the property. The payment deadline may vary slightly between states.
4. Can I include Stamp Duty in my home loan?
In Australia, while stamp duty cannot be directly added to your home loan as an ongoing expense, borrowers may increase their total loan amount (subject to eligibility) to indirectly finance stamp duty costs.
To prepare for payment, you must have sufficient savings to cover the stamp duty cost upfront. Note that if your deposit is less than 20% of the property value, you may need to pay a lender’s mortgage insurance (LMI). An LMI protects the lender in case you default on your loan.
You cannot explicitly add stamp duty to your home loan, but lenders commonly allow borrowers to increase their overall borrowing amount, indirectly financing stamp duty expenses, provided borrowing criteria are met. Our experienced mortgage brokers will advise you accordingly on how we set up your home loan.
5. Are there any exemptions or concessions?
There are some exemptions or concessions for stamp duty.
- First home buyers: If this is your first time buying a property, you can enjoy reduced stamp duty rates. However, you must meet certain eligibility criteria to qualify such as income limits and property value caps.
- Other concessions: If you’re a pensioner, you may enjoy reduced stamp duty rates in some states or territories. Concessions may also be available in situations when the property is transferred within families.
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