Stamp Duty Savings for First Home Buyers of New Homes
The “abolition of stamp duty” has been one of the headline-grabbing initiatives announced as part of the 2023-24 South Australian State Budget, however “stamp duty exemptions” would probably be a more accurate summary, with no across-the-board elimination of this state-based tax.?Home buyers should therefore make themselves aware as to whether or not they are eligible for an exemption and, if they are, which properties qualify before they rush out to secure a home.
Generally speaking, stamp duty is payable in South Australia when you purchase a residential house or land.?While there have always been some circumstances where stamp duty does not apply, it is usually an expense that home buyers and those investing in residential property have not been able to avoid.?The amount payable is not insignificant and it rises as the purchase price increases.?As an example, if you are purchasing a property with a contract price of $650,000, the stamp duty payable would total $29,580.?
Interestingly, stamp duty applies to the total purchase price if you are buying land with a house already on it - you are paying stamp duty on the value of the land together with the improvements on the land.?If you instead purchase vacant land on which to build, stamp duty is only payable on the price of the land itself - not on the cost of building.?For this reason, we have seen some buyers favouring the purchase of vacant land and building as they save on stamp duty costs.
The ‘key points’ to the stamp duty exemptions which have just been announced are as follows:
1.???The initiative applies only to contracts entered into on or after 15 June 2023;
2.???To be eligible for a stamp duty exemption, you must be a first home buyer;
3.???Exemptions apply only to brand new homes or vacant land purchased to build a new home;
4.???If you are building, there is a time limit to build;
5.???You must live in your new home for a set period of time after purchase or construction;
6.???Eligible new homes can have a value of up to $650,000, with relief progressively phased-out for properties valued at up to $700,000; and
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7.???Eligible vacant land can have a value of up to $400,000, with relief progressively phased-out for properties valued at up to $450,000.
We strongly recommend that you check-out the full details of the measures introduced on the Revenue SA website – revenuesa.sa.gov.au, or you can contact them on (08) 8226 3750.
In addition to the changes to stamp duty, the existing First Home Owner Grant (FHOG) remains in place, however the price cap for eligible properties has now been increased from $575,000 to $650,000, reflecting the property value threshold in the stamp duty exemption.?The FHOG is a payment of up to $15,000 available to eligible first home buyers who build or buy a brand-new home.?An eligible buyer who qualifies for the stamp duty exemption can also qualify for the FHOG, taking up to $44,580 off the out-of-pocket costs of an eligible home purchase.
Naturally, such a saving would be a massive help to a first home buyer, particularly after recent price increases in the Adelaide real estate market and the extra costs buyers now face in light of multiple interest rate rises.
Of course, these measures will fuel demand in two very specific market segments – vacant land priced below $450,000 and brand-new homes priced below $700,000.?Aside from assisting first home buyers, it is no secret that these measures are intended to stimulate the building industry, which will result in more demand for builders and building materials, potentially putting upward pressure on building costs.
Eligible buyers therefore have to do their market research to ensure they are getting good value with an eligible property and not merely spending the money they gain through grants and exemptions on inflated purchase prices and increased building costs.?It may even be the case that better value can be found in an older home where there is no government purchase assistance, particularly when you factor in the ‘hidden costs’ of a new build such as sheds and verandahs, blinds and curtains, light fittings and even the small items like that extra towel rail you need in the bathroom.??
This article’s author, Mark Sharoglazov, is the Managing Director of Harcourts Habitat, a licenced auctioneer and residential real estate specialist with over 15 years of industry experience.?If you would like to discuss the purchase or sale of your home or investment property in the greater Adelaide area, please give Mark a call directly on 0427 445 224, or at the office on (08) 8269 6922.
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