When you plan to buy a house, you need to incorporate all of the expenses that are required to be incurred at the beginning of buying. Unfortunately, most of the time, people forget to include stamp duty in their financial plan. Every Australian has to pay this tax when buying a house in Australia. Before getting into the detail of how it works, it is important to understand what it exactly is.
What is Stamp Duty?
The tax imposed by the government on gifts, insurance, and home loans. The amount charged is the higher of the market value or the property price (including general sales tax). This means the higher the price of a property is, the higher the stamp duty will be.
Who is Required to Pay it?
This is a very important and common question asked by many buyers and investors. Every buyer or investor who is purchasing property is required to pay stamp duty. An exception is that First home buyers in Queensland may be eligible to the First Home Buyers Stamp Duty Rebate, however each state varies. Therefore aim to include this in your budget to avoid any unpleasant surprise when you make a purchase.
Consult with the real estate agent or seek the help of a financial advisor to calculate the amount. As it will allow you to incorporate the expense in your budget and save you the unexpected trouble in the long run.
When is it Required to be Paid?
It is very important to be fully aware of when you should pay the stamp duty so as to avoid any hiccups. Buyers and investors are required to make the payment within 30 days of the property settlement. It is better not to delay the payment or else you might face problems in the future.
Why does the Government Charge Stamp Duty?
This is a very good question. If you are paying a substantial amount out of your pocket, you have every right to ask this question. Stamp duty is collected by the territory and state government. They use this amount for economic development and invest it back into the economy.
In other words, the amount is included in the state budget and it is used for the development of economic activities, such as emergency services, justice, police, roads, transports, and health.
How Much Does it Cost?
It varies from one state to another. Territory and state governments decide the amount required to be paid. It is not easy to calculate the amount you owe as stamp duty, because every state charges a different rate. This can be quite confusing for first time home buyers.
But the good news is, you can calculate the amount using an online calculator. The majority of the territory and state governments offer online calculators to find the amount you owe. You can also seek the help of a real estate agent. They have years of experience in the real estate market and know how the rate is calculated.
It is important to note that some governments offer concessions to first time home buyers. Moreover, different rates are applicable to those who buy land.
Many people ask whether they can get an exemption or not. The answer is yes, but the exemption is available only in extreme circumstances, i.e., in case of the death of joint tenant or owner of the property. There are some other situations where you don’t have to pay stamp duty. For example, you don’t have to make the payment if there is a change of tenure or the ownership is transferred to a spouse.
You can also get concession in some cases, which substantially reduces the amount due. You may become eligible for the concessions if:
- You are buying a property with the intention to live in it, or
- You are a first-time home buyer
If you purchase a new house in New South Wales as a first home buyer, a full exemption will be given to you for the property worth $550,000, and concessions will be offered if the amount varies between $550,000 and $650,000. Similarly, in Victoria, first home buyers are not required to pay stamp duty if they buy an established or new house for $600,000 with the intention to live in it for at least a year.
All in all, being an investor or a buyer in the real estate market, you should be aware of all the expenses so as to make a financially sound decision.