AustraliaFinanceInformativeStamp Duty

Do You Have to Pay Stamp Duty on Your First Home?

Buying your first home is a wonderful and exciting experience. For many, it symbolises a significant transformation from the rental lifestyle of youth to the established equity-gaining position of refined adulthood. Of course, people buy their first homes at many stages of life, some starting very young while others wait many years to choose the home they plan to truly invest in but the change-over from renting to owning is still significant. While you’re swirling in the happy haze of finding the perfect house, acquiring the financing needed to buy it, and pursuing all necessary paperwork, it’s important to know about the peripheral fees as well. You’ll need a conveyancer and maybe a real estate agent, you’ll need to be prepared for document processing and closing fees and, finally, you’ll have to pay the stamp duty.

For most first time home buyers’ it’s all too easy to forget about the stamp duty, which acts as a final cost tacked on at the end after all hands have been shaken, papers signed, and bottles popped in celebration. Unfortunately, those who forget the stamp duty are in for one heck of a sticker-shock when the bill comes in.

What is Stamp Duty?

Stamp duty is a particular kind of tax placed on high priced items and exchanges of money. In Australia, this is attached to all sorts of ways that money can change hands including some home loans, insurance payouts, and even personal gifts, however what concerns us today is that every single Australian real estate purchase comes with a stamp duty cost, paid by the buyer within 30 days of settling your new property. Why? Because the government needs money. As nice as it would be to have things like good quality roads, street lights, and public schools for free, these things are what taxes pay for and the stamp duty is no exception.

Where Does Stamp Duty Go?

When it comes to taxes, we’re mostly used to certain government-induced expenses going to specific projects. One tax goes to the schools, another to the roads, another to maintaining enjoyable public parks. The cops and officers of the court need to get paid somehow and that’s where taxes come in. Stamp taxes don’t have a designated project, they can be used for almost any local government project. The government can pour the stamp duty funds into any project that needs them either to function smoothly or grow to meet the needs of the population.

Roads are one of the primary focuses of stamp duty money, which makes sense because without roads, how would we get to our new homes? The local governments also tend to apply stamp duty money to things like healthcare, transport, paying the police, and funding the court justice system. Perhaps most importantly, stamp duty is often sent to pay for local emergency services. This allows your state to establish a safe and well-maintained place to live stocked with plenty of ambulances and EMTs, which is undeniably useful.

Who Pays Stamp Duty?

Stamp duty is paid by almost any Australian moving a large amount of money in one of the targeted categories, including large personal gifts. Relevant to this discussion, absolutely every purchase of property that is not a specifically approved money-free transfer of ownership is subject to the stamp duty, meaning buyers everywhere both first-time home buyers and investment property owners must pay it on every piece of property they buy. In other words, anyone who buys property pays the stamp duty on that property.

How Much is Stamp Duty?

Unfortunately for the quick and easy answer we’ve all been waiting for, stamp duty is established by the state governments so it, along with the rules surrounding it, change from state to state. In general, it is calculated based on either the value of the house or the amount paid, whichever is higher which unfortunately means that if you get a home at a steal but it’s valued much higher than you paid, you do not get to pay less stamp duty for clever bargain hunting.

stamp-duty-first-homeThat said, we can give you a few examples that will give you a ballpark idea of how much to save to pay the stamp duty on your new property. Let’s assume you’re looking for a $300,000 home in the state of South Australia. Here, the stamp duty will add a whopping $11,330 to your final expenses along with a mortgage registration fee of $160 and a transfer fee of $2,287

The same home in New South Wales (if it’s not your first home) would only set you back $8,990 for the stamp duty, $138.80 for the mortgage registration and $138.80 for the transfer fee. As you can see, every state does it a little differently, including the breaks they cut for first time home buyers.

Do I Have to Pay Stamp Duty?

This depends on conditions of your home purchase. If you want to live in South Australia, as many people do, then yes. You will have to pay the second highest stamp duty tax in all of AU (second only to Victoria). However, if you are a first time home buyer purchasing a home that will be your primary residence, every Australian state except SA and Tasmania will waive stamp duty for any home under the price of $550,000 and most have a scaling discount window for home prices above that line.

In short, if you are a first time home buyer in any state other than SA or TAS with a home below the cost of $550K, you will most likely not have to pay the stamp duty, but you will still need to prepare for the much lower cost of mortgage registration and the transfer fee.

Any other questions about stamp duty? We can help!

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Author Healy

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