A Closer Look at Australian Stamp Duty: Know Before You Buy

For most 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 a house, vacant land, or an apartment.

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 spend it on infrastructure, public facilities, and healthcare, amongst other things.?

Stamp Duty Australia: How Much Do You Need to Pay?

The stamp duty cost for most properties typically ranges between:

• 2-3% for properties valued under $500,000
• 3-4% for properties valued at $500,000 to $1 million
• 4-7% for properties over $1 million

For example, if your property purchase price is $1,000,000, then the Australia stamp duty payable is approximately $30,000–40,000.

Stamp duty is calculated based on three core variables:

• The property purchase price
• Location, such as New South Wales
• Intended purpose, e.g. Primary residence or investment

Each state government has its way of calculating stamp duty, so figures will vary depending on the variables you enter. Note: The Australia stamp duty cost vs. property price relationship is not linear. The higher the property value, the more stamp duty is payable percentage-wise.

When Do You Have to Pay the Stamp Duty in Australia?

Your stamp duty deadline will vary from State to State. Your appointed conveyancer, solicitor, or settlement agent will advise you and assist with paying the stamp duty to the State’s Revenue Office (SRO).

If you are obtaining a mortgage, the solicitors usually pay the stamp duty on the day of settlement. Use the funds available at settlement from the loan proceeds or your contributions.

The Australian Property Stamp Duty Deadlines for Different States

• NSW: Stamp Duty is to be paid to the SRO within 90 days of settlement. If purchasing off-the-plan, Stamp Duty is payable within 90 days of the signed contract date.
• VIC: Stamp Duty is to be paid to the SRO within 30 days of settlement.
• QLD: Stamp Duty is to be paid to the SRO within 30 days of settlement.
• WA: Stamp Duty is 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 is to be paid to the SRO within 60 days of entering into a transaction or settlement, whichever is earlier.
• SA: Stamp Duty is to be paid to the SRO on the day of settlement.
• TAS: Stamp Duty is to be paid to the SRO within 90 days of settlement.
• ACT: Stamp Duty is 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.

Do You Need to Pay Foreign Buyer Property Stamp Duty Surcharge in Australia?

In the last few years, the Australian 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%. For the rest of the states, it is 7%.

Note: You are not a foreign buyer if you are an Australian citizen or an Australian permanent resident, even if you reside overseas.

Stamp duty surcharge is a 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 Australian property stamp duty on top of the standard fee! Note: If you are an Australian citizen purchasing a property jointly with your spouse, who is a foreign national, take heed!

Foreign Buyers' Stamp Duty Can Be an Unexpected Shock

Here are two scenarios where the foreign buyers’ stamp duty in Australia applies:

1. A foreign national buys a $1,250,000 property in NSW, equating to a standard stamp duty of $54,052 plus an Australian stamp duty for foreign buyers of $100,000 for a total of $154,052.
2. An 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 a 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 have 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 to increase your borrowing capacity. They won’t appear on the title of the property.

Note: Anyone on the mortgage application will be liable for the mortgage repayments even if they are not on the title. In divorce cases, the Family Law Court will ultimately decide who gets what instead of who’s on the property title.

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 tax in Australia.?

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 live 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 homeowner benefits once you return to Australia.?

How to Borrow the Entire Australian Stamp Duty in Your Mortgage

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 rate, so the 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 to Pay the Stamp Duty Tax

If you have an existing Australian property, you can offer that property as additional security, and the bank will allow you to borrow up to 80% of its value.

For example:

• 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, 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 to Help Pay the Stamp Duty Rate

This method doesn’t require you to have any existing properties, but it does rely on your parents being willing and able to offer their property as additional security for your loan. Assuming there’s sufficient equity available in their property, the bank may then allow you to borrow up to 80% of its value.

Method 3 - Lender's Mortgage Insurance (LMI) to Support the Australian Stamp Duty Charge

You can borrow up to 90% of the property’s value by paying Lender's Mortgage Insurance (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 get added on top of the loan amount. For the $1,000,000 purchase, you could borrow $900,000 by adding a $20,000-30,000 LMI fee on top of your loan. 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 need more savings/deposit, or you want to enter the property market sooner rather than later.

Prepare Financially for Stamp Duty Costs in Australia

Lack of foresight into the cost of stamp duty can derail your property-buying journey and sometimes 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 its efforts to make Australia a more desirable place to live!

Speak with one of our tax specialists to find out how you can prepare for and save on Australian property stamp duty.

Contact the State Revenue Office as per the States

? NSW: www.osr.nsw.gov.au

? VIC: www.sro.vic.gov.au

? QLD: www.osr.qld.gov.au

? WA: www.osr.wa.gov.au

? NT: www.treasury.nt.gov.au

? SA: www.revenuesa.sa.gov.au

? TAS: www.sro.tas.gov.au

? ACT: www.revenue.act.gov.au

Frequently Asked Questions

What are the factors that determine how much Australian stamp duty is to be paid?

The key factors that determine stamp duty are the purchase price of the property, the location of the property (which state/territory), and the buyer's status (such as first home buyer, foreign buyer, etc.). Rates vary between states and territories and are not uniform across Australia. Within a state, the stamp duty rate rises progressively based on the property purchase price.

Other factors like property type and buyer eligibility for concessions also impact the amount payable.

How is stamp duty in Australia calculated?

Stamp duty is calculated as a percentage of the purchase price, with the exact percentage determined based on the state/territory and property value. Most states have stamp duty 'brackets' where the rate increases once the property value hits a certain threshold.

The residency status of the buyer (Australian citizen, foreigner, etc.) can also affect the rate. Use an online stamp duty calculator or consult an accountant to determine the amount payable on a property.

Does Australian stamp duty cost the same across all states and territories?

No, stamp duty rates vary widely across different Australian states and territories. Each state has its own thresholds and progressive stamp duty rates based on factors like property value, buyer status, location, etc. It's important to check the specific stamp duty rules and rates applicable in the state where you are buying the property.

Are there any exemptions or concessions available for stamp duty in Australia?

Yes, certain buyers, like first homeowners, may be eligible for exemptions or discounts on stamp duty in some states. Senior citizens, pensioners, etc., may also qualify for concessions in certain cases. Eligibility criteria can vary across states, so check individual state revenue office websites for the most current details.

When should the stamp duty be paid?

Stamp duty is due at settlement - when a property officially changes ownership. For properties bought with a mortgage, it is common for stamp duty to be paid on your behalf by your lender or conveyancer out of the loan amount on the day of settlement.

Do you need to pay a Foreign Buyer Stamp Duty Surcharge?

In some states, yes - foreign buyers are subject to a stamp duty surcharge ranging from 7-8% on top of standard stamp duty rates. However, if you are an Australian citizen or permanent resident purchasing locally, you are exempt even if living overseas. Check if the surcharge applies in your state.