Understanding stamp duty

By Nila Sweeney
stamp duty is the tax on the purchase of a new home

A major up front cost that you have to consider when buying a house is stamp duty. 

What is it and why do you need to pay it?​

Purchasing a new home 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 stamp duty you pay 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 to pay.

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 buying.

Previous discounts for first-time buyers or low earners? 

In years gone by there were discounts and concessions available for stamp duty. Some examples are listed below. It is best to check with your local mortgage broker as to whether discounts are still available.

Every state had a first-time buyer concession in place for stamp duty. This was designed to make it easier for people to get their first home. The problem is that they differ quite considerably.

NSW was 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 $500,000-600,000.

There was 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 had 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 had 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 operated 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 offered a staggered concession for first homebuyers on houses up to $500,000 in value and land up to $300,000.

Calculate how much stamp duty you will pay:
Visit our free - to - use stamp duty calculator

Other revenue office website links
Victoria www.sro.vic.gov.au 
NSW www.osr.nsw.gov.au
ACT www.revenue.act.gov.au
Tasmania www.treasury.tas.gov.au
South Australia www.revenuesa.sa.gov.au
Western Australia www.dtf.wa.gov.au
Queensland www.osr.qld.gov.au
Northern Territory www.nt.gov

More Home Loan Guide