Understanding Stamp Duty
by Nila Sweeney
One of the big upfront costs involved in buying a house is stamp duty. What is it,
why do you need to pay it and what discounts are available to you as a first-time
Buying a house is the largest transaction that most people will make and the sums
involved mean that the amount of stamp duty payable can be a problem. But what is
stamp duty? It is revenue levied by states on various types of transactions such
as transfers and agreements for the sale of real estate (referred to as transfer
duty), documented gifts, policies of insurance, mortgages, hire of goods (rental),
and the transfer and issue of motor vehicle licences.
The amount of duty will vary depending on the value of the property you intend to
buy, and is decided upon differently by the government of the state you're buying
in. Working out the amount you have to pay can become confusing due to the different
approaches by each state. Beyond that, there are concessions for first-time buyers,
different rates if you're buying land and also sometimes a separate mortgage duty
How is stamp duty calculated?
Stamp duty is calculated by applying a sliding scale of taxation, depending on the
value of your property. The general rule is that the cheaper the property, the less
tax will be paid. Most states have a system that will slot your property into a
value category ($100-200,000) and will ask for a lump sum plus an extra amount for
every $100 over the lower end of the category (eg $100,000).
Northern Territory does not employ a classification system as such, but uses a formula
to work out the rates of duty, based on the value of the house. Given the different
approaches taken, the best advice is to visit your revenue office for specific advice
on your stamp duty situation. Almost all have calculators on their websites that
will tell you how much you'll need to pay out in stamp duty for the house you're
Is there a discount for first-time buyers or low earners?
Every state has a first-time buyer concession in place for stamp duty. This is designed
to make it easier for people to get their first home. The problem is that they differ
NSW is probably the most generous state. It has a system in place called the first
home Plus Scheme. Eligible first homebuyers pay no transfer or mortgage duty on
homes valued up to $500,000, or they receive a concession on houses valued between
There is no duty paid on land purchase to build a first home, valued at up to $300,000,
plus a concession on land valued between $300,000 and $450,000.
The ACT has a concession scheme for houses less than $330,000 in value. Eligibility
depends on the household income, which is staggered depending on the number of children
a family has.
Western Australia has a concessional rate for houses less than $200,000 in value,
but also a first homeowner rate for property valued at less than $350,000 or land
valued at less than $200,000.
South Australia operates a first-time buyer concession asking for no stamp duty
on a property valued at less than $80,000 and a staggered reduction in duty on houses
up to $130,000 in value.
Queensland offers a staggered concession for first homebuyers on houses up to $500,000
in value and land up to $300,000.
Are you eligible for the discount?
Eligibility differs for each state, but the criteria remain roughly the same for
the first-time buyer concession:
Mortgage duty - are you liable?
• Applicants must be a person, not a company or trust.
• Applicants must be a permanent resident or Australian citizen.
• Applicants must be over 18 years of age.
• No co-purchaser may have previously owned a residential property within Australia.
• Must be a principal place of residence for a continuous period of six months.
It's advisable to contact your revenue office website to gain a quotation for your
Some states have, or are in the process of, abolishing mortgages duty, as it can
be an unwelcome extra burden on top of transfer duty.
In NSW, the mortgage duty is $5 up to $16,000, then $4 for every $1,000 above $16,000.
In Queensland, the duty is 40 cents for each $100 secured by a mortgage. In Tasmania,
mortgage duty will be abolished on 1 July 2007. Until then, you pay $20 for amounts
up to $10,000 and 0.175% of the total amount secured above $10,000.
In Western Australia, the cost is $20 for amounts up to $10,000, plus 20 cents for
each $100 above that. In South Australia, ACT and Victoria, mortgage duty has already
been abolished on home loans.