Stamp duty, or transfer duty as it is sometimes referred to, is a state government tax that a buyer pays on the purchase of a house. Stamp duty on houses is charged on a sliding scale which differs depending on which state you are buying in. Paying stamp duty on buying a house is a tax that is levied on most people purchasing property, so it is an expense that you need to be prepared for when you are budgeting for the purchase of your new home.
What is stamp duty in Australia used for?
Stamp duty on the purchase of houses is a tax that is levied by all states and territories in Australia. Though there is no fixed list of items that the stamp duty you pay is used for, it does contribute to the cost of appropriate legal documentation that is levied by governments in relation to the change of property ownership and it is used to contribute to other state and territory responsibilities. These can include emergency services, the justice department including police, roads and transportation and public health services.
How to calculate the stamp duty on buying a house
When you are considering the purchase of a home or investment property it is always best to know how to calculate what the cost of your stamp duty will be. You can use basic formulas to calculate stamp duty on houses you are looking to buy which should be adapted for the state you are looking to make your purchase in. There are plenty of stamp duty calculators available online to help you calculate this additional expense quickly and easily. If you are planning on buying a property in Western Australia, the stamp duty rates are as follows:
|Property Price||Stamp Duty Rate|
|Up to $80,000||$1.90 per $100 or part thereof|
|$80,001 to $100,000||$1,520 plus $2.85 per $100 or part thereof above $80,000|
|$100,001 to $250,000||$2,090 plus $3.80 per $100 or part thereof above $100,000|
|$250,001 to $500,000||$7,790 plus $4.75 per $100 or part thereof above $250,000|
|$500,001 and over||$19,665 plus $5.15 per $100 or part thereof above $500,000|
So if you are planning on buying a property for $350,000 you would calculate your stamp duty as follows:
Calculate how much your purchase price is over the threshold amount
$350,000 – $250,000 = $100,000
Calculate how many many $100’s are contained in the additional amount
$100,000 ÷ 100 = 1,000
Calculate the additional cost above the fixed stamp duty amount
1,000 x $4.75 = $4,750
Add this amount to the fixed stamp duty rate for your price bracket to get your final stamp duty amount
$4,750 + $7,790 = $12,540
Exemptions from stamp duty in Australia
In Australia, there is a selection of situations in which you may be exempt from paying stamp duty on your purchase or situations in which you can apply for a reduced stamp duty rate. If you are a first home buyer purchasing a property up to the value of $430,000 you will be exempt from paying stamp duty. You will also have access to a reduced stamp duty rate for property priced between $430,001 and $530,000 of $19.19 per $100 or part thereof above $430,000. If you are a first home buyer purchasing land up to the value of $300,000 you will be exempt from paying stamp duty and for land priced between $300,001 and $400,000 your stamp duty rate will be $13.01 per $100 of part thereof above $300,000.
There are also concessional rates that can be applied to stamp duty on houses in Western Australia if the property is below $200,000 in value and will be the purchaser’s primary place of residence. Other circumstances where the buyer may be exempt from paying stamp duty in Australia include:
- Stamp duty that is being paid by a State, government or public authority
- Purchases of properties for charitable purposes
- Transferring farms between multiple properties
- Property that is purchased or transferred as part of bankruptcy proceedings
- Business transactions where property is being transferred to incorporated associates
- Cancelled transactions
When does the payment of stamp duty occur?
As the rates of stamp duty vary from state to state, so does the point in the property purchase at which you are required to pay stamp duty on houses. This timeframe can range from 14 days after receiving a notice of assessment in the ACT to within 3 months of the transfer of property in Tasmania. In Western Australia, stamp duty is due to be paid one month after a duties assessment notice is issued.
How to arrange payment of stamp duty on buying a house
If you are using the services of a licensed conveyancer for the settlement of your new property, the calculation and payment of stamp duty is usually included in their services. Your conveyancer will collect the money from you prior to making the payment and will execute the transaction on your behalf so although you need to ensure that you have the money for stamp duty payment, your conveyancer will take care of the actual payment for you.
The future of stamp duty in Australia
If you have been wondering what stamp duty is used for in Australia, so too have your local state and territory governments. Charging stamp duty on buying a house is part of an old taxation law that dates back to the days when the transfer of property records was a labour-intensive process. These days, there is significantly less for your government to do when it comes to the transfer of property ownership as everything has been digitised and records are largely up to date across the country.
Certain states have proposed changes to the payment of stamp duty in recent times and it looks as though change is afoot concerning how tax is imposed on the purchase of property in Australia. For the most up to date information on paying stamp duty in Australia, you should discuss the current situation in your state or territory with your conveyancer when you are looking to purchase a property. For Western Australias, you can visit the Department of Finances website for further information.
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