What is stamp duty?
The State Revenue Office requires that land transfer duty is paid when you purchase property in Victoria. The amount is based upon your property’s value, meaning that the higher the value, the more stamp duty you will pay. Once you have settled, you have 30 days to pay your stamp duty, but in many instances your conveyancer will coordinate this for you when your house title is exchanged. It’s a sunk cost that you cannot recoup and each time the property is sold in the future, it will be paid again by the purchaser. It is important to know that the duty is calculated upon either the purchase price or market value of your property, whichever amount is higher.
State and territory governments collect stamp duties across Australia and it is revenue that is factored into budgets and spent on goods, services and other public spending. In short, stamp duty is a levy on your property transaction.
Currently there are other factors that affect how much stamp duty you will need to pay besides the market value or purchase price. In general if you are a first home buyer that intends to use your newly purchased house as your primary place of residence and you are not a foreign purchaser, you will pay less stamp duty due to a number of concessions that may apply. In some instances, up to a 50% discount on stamp duty can be obtained by first home buyers if the purchase price/market value falls below $600,000. This means a $599,000 property would incur stamp duty of $15,535 as versus a $602,000 property which would incur a $31,190 duty.
Most recently however, the State government has announced a series of housing initiatives concerning home buying and stamp duty in Victoria. The recently released 2017-18 budget revealed some promising details for the first home buyers in Victoria, which if approved by the parliament will be finalised in further detail by the middle of 2017.
In a package valued at some $851 million, the State government has declared its plans to eliminate stamp duty for first home buyers on properties up to the value of $600,000. Based on a proportionate scale, stamp duty discounts will also apply on properties that are up to the value of $750,000, but the closer the value is to $600,001 the greater the concession you will receive as a first time buyer. This represents promising news for Melbourne home builders and all first home buyers and who are purchasing a home as their primary residence especially as the exemptions or concessions with be applicable for both new and established homes. Another announcement regarding stamp duty will affect off-the-plan (OTP) purchases for buyers who enter into house land packages in Geelong, Melbourne and across the state. The current OTP concession will be changed so it will soon be applicable to only buyers purchasing OTP properties as their principle place of residence. This will mean holiday homes, investments and commercial properties will no longer receive the OTP concession.
If approved by parliament, the State Revenue Office anticipates that the new stamp duty initiative will apply to ‘transfers resulting from contracts entered into on or after July 2017.’ Unfortunately for some, if you signed your contract before July 1, 2017 but settle after that date, you will not be eligible for the new exemption or concessional rate of stamp duty, but may still claim current reductions if you meet the criteria. It is advised that you monitor their website for more information as it becomes available. Happy saving!