For the majority of home buyers, paying Stamp Duty in Australia is an unavoidable step in property ownership. It is arguably the single most expensive cost you’ll have to pay in acquiring a property, whether that be a house, vacant land or off-the-plan apartment.
So what exactly is Stamp Duty in Australia?
Stamp duty is a tax charged by the Australian states and territory governments on certain documents and transactions – the main one being property transactions.
The States collect the tax and spends it on infrastructure, public facilities, and healthcare, amongst other things.
How much is Stamp Duty in Australia for properties?
The Stamp duty cost for most properties typically ranges between 4% to 5% of your property’s value.
E.g. If your property purchase price is $1,000,000 then Stamp duty cost payable is approximately $40,000 – $50,000.
Stamp duty is calculated based on three core variables:
- The property purchase price,
- Location, e.g. NSW
- Intended purpose, e.g. Primary residence or investment
Each State Government has its way of calculating stamp duty so that figures will vary depending on the variables you enter.
Try our Australian Stamp Duty Calculator!
- First Home Buyer means that it’s the first time you bought a home that you will be living in for at least 6 months of the first 12 months of ownership. For an Australian expat, this is usually always ‘No’.
- Foreign Purchaser means that you are not an Australian citizen or Australian Permanent Resident. If you are an Australian expat, you are not a Foreigner Purchaser.
- Transfer fee is a state government fee for updating the land’s ownership title records to your name.
- Mortgage fee is another government fee. For registering your mortgage and the lender as mortgagee on your property.
When do you have to pay the Stamp Duty?
This will vary from State to State.
Your appointed conveyancer, solicitor or settlement agent will advise you and assist with the payment of the Stamp duty to the State’s Revenue Office (SRO).
If you are obtaining a mortgage, the Stamp Duty is usually paid on the day of settlement by the solicitors. By using the funds available at settlement, either from the loan proceeds or from your contributions.
Stamp Duty Deadlines:
|NSW||Stamp Duty to be paid to the SRO within 90 days of settlement. If purchasing off-the-plan, Stamp Duty is payable within 90 days of signed contract date.|
|VIC||Stamp Duty to be paid to the SRO within 30 days of settlement.|
|QLD||Stamp Duty to be paid to the SRO within 30 days of settlement.|
|WA||Stamp Duty to be paid to the SRO within 30 days of receiving the Duties Assessment Notice. To receive the Assessment Notice you’ll first have to lodge your Transfer documents to the SRO within 60 days of the settlement.|
|NT||Stamp Duty to be paid to the SRO within 60 days of entering into a transaction or settlement, whichever is earlier.|
|SA||Stamp Duty to be paid to the SRO on the day of settlement.|
|TAS||Stamp Duty to be paid to the SRO within 90 days of settlement.|
|ACT||Stamp Duty to be paid to the SRO within 14 days of receiving the Notice of Assessment. To receive the Assessment Notice you’ll first have to lodge your Transfer documents to the SRO within 14 days of the settlement.|
Foreign Buyer Stamp Duty Surcharge – Do you need to pay it?
In the last few years, the State Governments have imposed additional Stamp Duty of up to 8% for anyone who is a foreign buyer.
This surcharge gets added on top of the standard Stamp duty.
There is currently no Foreign Buyers Stamp Duty Surcharge in the Northern Territory and the ACT. In NSW and VIC, it’s 8%, and for the rest of the states, it is 7%.
Stamp duty surcharge is common practice amongst other developed countries to help curb the strong demand for foreign investment into residential properties, control housing affordability, and generate extra tax revenue.
Countries such as Hong Kong, Singapore and Canada have implemented similar measures with comparatively harsher fees as high as 20% additional Stamp Duty on top of the standard fee!
Foreign buyers stamp duty will apply to half of the property’s value which can be an unexpected shock.
- Foreign national buys a $1,250,000 property in NSW this would equate to a standard Stamp duty of $54,052 plus Foreign Buyers Duty of $100,000 for a total of $154,052.
- Australian citizen buys a $1,250,000 property in NSW with a foreign spouse, jointly owned 50/50. This would equate to a standard Stamp duty of $54,052 plus Foreign Buyers Duty of $50,000 for a total of $104,052.
The alternative is to purchase in the Australian spouse’s name and only having to pay the standard Stamp Duty of $54,052.
In some cases, you’ll still be able to have your Foreign national spouse on the Home loan application if you need to show more income for borrowing capacity. They won’t appear on the title of the property.
How to reduce or avoid paying Stamp Duty altogether
In some circumstances, you may be able to get a concession or exemption from paying stamp duty.
If you are residing overseas, it’s highly unlikely you’ll be eligible for the First Home Owners stamp duty concessions, as you’ll need to be living in the property for at least six months of the first year of ownership.
But fret not.
You can purchase multiple investment properties in Australia while overseas and still be eligible for the First Home Owner benefits once you return to Australia.
Other stamp duty exempt scenarios:
In cases of divorce where mandated by Court order, Stamp duty will be waived when transferring properties to the other party.
If a family member passed away and in their Will, it’s stated the properties are to be passed down to you, then Stamp Duty will also be waived.
How to borrow the entire Stamp Duty in your home loan
In most cases, the banks will only lend you up to 80% of your property’s value which means you’ll still need to come up with the remaining 20% deposit yourself, plus the 4% – 5% stamp duty, so total contribution required is approximately 25%.
Using an example of a $1,000,000 property, you’ll need $250,000 for your contribution.
So how can you come up with that $250,000?
Method 1 – Releasing Equity (Top-up/cash out) from an existing property
If you have an existing Australian property, you can offer that property as additional security and the bank will allow you to borrow against that property up to 80% of its value.
- You have an existing property worth $500,000 with a current loan balance of $150,000.
- The bank will allow you to borrow up to 80% of the value so a maximum potential loan of $400,000.
- You top up your loan from $150,000 to $400,000 which is a $250,000 cash out or equity which you then take and pay for the remainder of the first purchase effectively borrowing the entire amount of the purchase and the stamp duty.
Method 2 – Family Guarantor home loan
This method doesn’t require you to have any existing properties, but it does rely on your parents having one.
It’s the same concept as the first method. Your parents offer their property as additional security to the bank and assuming there’s sufficient equity available in their property; the bank will allow you to borrow up to 80% of the value.
Method 3 – Lender’s Mortgage Insurance (LMI)
You can borrow up to 90% of the property’s value by paying LMI to the bank. If you borrow 80% or lower, there is typically no LMI fee payable.
If you borrow 90%, the LMI fee would be approximately 2-3% of the property value and gets added on top of the loan amount.
In the case of the $1,000,000 purchase, you could borrow $900,000 by adding a $20,000-30,000 LMI fee on top of your loan. So your total loan amount would be $920,000-930,000.
Paying LMI is only something we’d recommend if you can’t do the first two methods, you don’t have sufficient savings/deposit, and you want to enter the property market sooner rather than later.
Lack of foresight into the cost of Stamp Duty can derail your property buying journey and in some cases give you a nasty surprise after signing an unconditional purchase contract especially if there’s a foreign citizen involved.
That said, the hefty tax bill is mostly unavoidable. To ease the pain, look at it as your tax-deductible donation to the State government in their efforts to make Australia a more desirable place to live!