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Calculating Stamp Duty in New South Wales

By June 13, 2017 No Comments

Although New South Wales is a wonderful place to live, it is also the most expensive state in Australia to buy a home. Therefore, it’s important to become acquainted with all the costs involved beforehand. One of the largest potential costs is the stamp duty, often called the “transfer duty.” The stamp duty is a tax levied by Australian states and territories on certain paperwork-intensive transactions, such as the sale of property. Determining your stamp duty payment isn’t always easy. However, you can get an initial estimate with a stamp duty calculator. You may also find the examples we run through below helpful. However, recent changes coming into effect July 1st, 2017, are changing the landscape and may lower or even eliminate your payment if you’re a first-time homebuyer. Reach out to a trusted conveyancer to discover what your precise stamp duty payment or savings will be.

Estimating stamp duty in NSW

When researching and discussing stamp duty payments, you are bound to come across the term “dutiable value” frequently. Don’t let this term mystify you. In most contexts, it is simply the property’s sale price, or its market value, whichever is higher.

The formula for calculating stamp duty in NSW is different for each of the seven distinct price categories the state designates. However, most property sales fall into only three of those categories, which we will focus on here.

$80,001 through $300,000

For properties in this range, the stamp duty formula is $1,290 plus $3.50 for every $100 of the property’s dutiable value above $80,000. For example, suppose you’re buying a home with a value of $300,000. That’s $220,000 greater than the $80,000 threshold in the formula. $220,000, in turn, has 2,220 $100s in it. So according to the formula, we will have a stamp duty of $1,290 plus $3.50 x 2,220, which brings us to $9,060, roughly 3% of the value of the property.

$300,001 through $1 million

For properties in this range, the formula is $8,990 plus $4.50 for every $100 of the property’s dutiable value above $300,000. For example, suppose you’re buying an apartment with a value of $700,000, a typical price for an apartment in Sydney. That’s $400,000 greater than the $300,000 threshold. $400,000, in turn, has 4,000 $100s in it. So according to our formula, we have a stamp duty of $8,990 plus $4.50 x 4,000, which brings us to $26,990, approaching 4% of the value of the property.

$1 million to $3 million

For properties in this range, the formula is $40,490 plus $5.50 for every $100 of the property’s dutiable value above $1 million. For example, suppose you’re buying your dream home, priced at $2.5 million. That’s $1.5 million greater than the $1 million threshold. $1.5M, in turn, has 15,000 $100s in it. So according to the formula for this range, we have a stamp duty of $40,490 plus $5.50 x 15,000, which brings us to $122,990, approaching 5% of the property value.

Making adjustments

It’s important to emphasize that the three estimates above only apply to homebuyers without an exemption, and prior to taking any concessions or other adjustments into account. Although NSW does not currently have concessions in place for pensioners, they do have generous concessions in place for first-time homebuyers who are not already benefiting from an exemption. These concessions are also in the process of expanding.

The estimates above also assume that the buyer is an Australian resident that is not buying investment property. Foreign investors pay higher stamp duties, and the NSW government has been in the process of raising their fees in recent years, including 2017.

Recent changes to stamp duty payments in NSW

In recent months, the NSW government has taken strong measures to make housing more affordable in the state by adjusting stamp duty payments for two types of buyers: first-time homebuyers and foreign investors.

New stamp duty exemption threshold for first-time homebuyers

As of June, 2017, NSW already has an exemption from stamp duties in place for first-time homebuyers purchasing a home of $550,000 or less. The state also has concessions for first-time homebuyers purchasing a home between $550,000 and $650,000. However, effective July 1st, 2017, the state’s new housing affordability package is raising the exemption threshold to $650,000 and the concession threshold to $800,000. Stamp duty concessions will now also include established homes. Further, there will no longer be any stamp duty for lenders mortgage insurance, also known as LMI. However, the state is removing concessions for off-the plan apartments.

New increase in foreign buyer stamp duty payments

Also effective July 1st, the NSW government is doubling the stamp duty surcharge on foreign investors, from four to eight percent, the highest of any state in Australia. The aim is to prevent foreign investors, which now represent approximately one in ten homebuyers in NSW, from driving prices out of reach for Australian residents, and especially first-time homebuyers. The government is also ending a stamp duty concession for foreign investors which came in the form of a one-year stamp duty deferral.

Adding it all up

New South Wales is one of the most desirable, but also one of the most expensive, places to buy a home. To make sure you can realize your dream of owning property in NSW, it’s important to get acquainted with the complete cost of the property transfer, which may include a sizable stamp duty. Exemptions and concessions not withstanding, the payment typically ranges from roughly three to five percent of the sale price, as the examples above illustrate, with notable exceptions at either end of the price spectrum. For an initial estimate of your stamp duty payment, you may want to explore the formulas above, if they apply to your situation, as well as a stamp duty calculator. However, new exemption and concession thresholds for first-time homebuyers, along with other adjustments, are changing the payment landscape this year. The state government is working hard to make housing more affordable in NSW. Effective July 1st, first-time homebuyers may find themselves saving thousands on their purchase, while foreign investors may find themselves paying thousands more. To navigate this complex payment landscape, and to find out just how much you will spend or save on your stamp duty payment, always reach out to a trusted conveyancer.