There are many costs that come with buying or building a house and it is essential to factor them all in when planning to buy a house. However, we know from our customers that first home buyers get a lot of terminology and financial jargon thrown at them, which can feel overwhelming. After all, most of us are blissfully ignorant of home buyer lingo until it concerns ourselves!
Stamp duty seems to be one of the biggest question marks (and the biggest money pit after the deposit) for most people, so we thought we’d have a crack at breaking it down. In this blog we will answer all the most common questions that our customers ask us about stamp duty.
What Is Stamp Duty?
Stamp duty is a tax paid to the State Government for a variety of transactions, buying property being one of them. The buyer pays the tax to the state revenue office. Stamp duty is an upfront cost to pay on top of your deposit, so if it applies to you, it should be included in your budget from the start.
How Much Will Stamp Duty Cost?
Unfortunately, we couldn’t tell you as it is different in each individual case and each state too. However, there are some general factors that influence stamp duty, such as:
- Price of the property
- Whether the property is a new build, an established property or vacant land
- Whether the property is bought as an investment or primary residence
- Whether the buyer is a first home buyer or not
There are a variety of stamp duty calculators online that are helpful to get an idea of how much your stamp duty might be.
When Does Stamp Duty Apply?
Simply put, stamp duty applies to the purchaser in a property transaction, but there are many exceptions. These exceptions vary from state to state. First homeowners get stamp duty exemptions or concessions in many states.
Depending on the state, you might be exempt of stamp duty if you are purchasing:
- As a first home buyer
- Off the plan
- From a deceased estate
- Low value property
- As a pensioner
When Will I Have to Pay Stamp Duty?
In Australia, stamp duty is generally paid within 30 days of the settlement. Therefore, it is essential to have it at hand and ready to go, so you can then focus on the repayments of your loan and other costs. Once again, it does vary from state to state though. Longer time frames may apply to off the plan properties.
How Can I Pay Less Stamp Duty?
This question is difficult to answer, because stamp duty is different in each state. The most important thing to do first up is find out how stamp duty is calculated in the state where you’re buying a home. There is good information online, but you could also contact the state government directly to ask for help.
Other than that, you could do the following to reduce stamp duty cost:
As mentioned earlier, stamp duty correlates with the price of the property. $500,000 is a good margin to keep in mind, as stamp duty tends to increase significantly past that point. Different states have different thresholds where a stamp duty price will jump up.
When purchasing a house and land package, the stamp duty is again higher the higher the property price. If you’re worried about stamp duty and wanting to keep your budget low, it might be a good idea to lower building costs for the house you’re getting. Consider choosing a simpler design – remember your first home doesn’t need to be your forever home!
This one is obviously not realistic for everyone, but some states have practices that are much more advantageous when it comes to stamp duty. Buying interstate is worth considering especially for those buying investment properties or those considering a move either way.
If you are obligated to pay stamp duty and unable to lower it with these techniques, it is still good to be aware that it exists. Keep it in mind when budgeting and before settling on a home to buy. The biggest mistake first home buyers make is simply being oblivious to stamp duty and not budgeting for it. Since you’ve now read this post, you’re already another step ahead in the process of buying a home! Hopefully we helped shed some light on how stamp duty works and answered some of your burning questions.
If you still have questions left, why not book a call with one of our financial consultants to discuss how we can help you get into your own home sooner?