Budgeting for your new home or business property purchase in Queensland involves more than just determining a suitable down payment.
Australian states historically have collected a tax on land and property transfers, both residential and business. You’ll hear this commonly referred to as the stamp duty, as it involved covering the government’s cost of reviewing your documents to make sure all was in legal order, then confirming the review with a stamp. Queensland, however, changed the official title of the tax to “transfer duty” when the Duties Act 2001 replaced the Stamp Act 1894.
While you can obtain a good idea about what your transfer duty on a property purchase will be using the stamp duty calculator, a good number of exemptions have been created over the years, so getting an exact figure is better served by relying on the calculation of a professional conveyancer.
Basics of a Transfer Duty
While it would seem to be straightforward to say a transfer duty is a tax imposed upon any property sale, many other factors, concession and exemptions go into the process to complicate the matter. Let’s try to address it with a few questions:
- What is a transfer duty? A fee imposed upon any sale, purchase or transfer of land or property; the government refers to these as “dutiable transactions.”
- What classifies as a “dutiable transaction”? Any sale of a home, apartment or business property; a transfer of half of any property you own to your spouse as a gift; granting an easement to allow someone to use a portion of your property; creating a trust over land you owned for your children or other family members.
- Who pays a transfer duty? Legally, both seller and purchaser are responsible for paying transfer duties, but traditionally the purchaser pays. In the case of transfers, that decision can be left to the involved parties.
- How is the transfer duty determined? Transfer duties in Queensland are calculated upon the unencumbered value of the property or the price you agree to pay, whichever is higher. Therefore, even in a transfer where no money changes hands, such as parents giving a home to a child, a duty is imposed based upon the determined value of the property.
- What are the transfer duty rates? Queensland last updated its transfer duty rates in 2012. They are based upon a modified sliding scale: transactions $5,000 or less, no duty; transactions $5,000 to $75,000, $1.50 for each $100 or part of $100 over $5,000; transactions $75,000 to $540,000, $1,050 plus $3.50 for each $100 or part of $100 over $75,000; $540,000 to $1,000,000, $17,325 plus $4.50 for each $100 or part of $100 over $540,000; more than $1,000,000, $38,025 plus $5.75 for each $100 or part of $100 over $1,000,000. An additional 3% fee is charged for any purchase involving foreigners, including companies and trusts.
Where It Gets Complicated
While all of this seems pretty simple, the addition of concession and exemptions begins to complicate the process. While the government certainly wants to collect its share of tax dollars, lawmakers have created these concessions and exemptions as incentive for homebuyers and businesses.
For instance, Queensland offers both a home concession for anyone who plans to occupy the residence they are purchasing and a first home concession for first-time homebuyers. The first home concession offers a better deal, but is available for homes valued at less than $550,000. If your first-time home is valued higher, you don’t qualify, but you still qualify for the home concession.
Queensland also offers a First Home Owners’ Grant program that provides cash to help first-time homebuyers get into their new homes faster. The grant generally is $15,000, but until 30 June 2017, homebuyers could receive a grant of $20,000. First-time homebuyers can apply and qualify for both programs, though they have different eligibility requirements, but some of the benefits might cancel each other out.
In the field of transfers, the government also has created certain exemptions that apply so no transfer duties are charged.
For instance, when the transfer is involved in an inheritance. If a parent dies and that home is transferred to the children, either through will or rules of intestacy (where no will exists or can be found), then the inheritors do not pay any transfer duty. However, if they decline the inheritance and wish to sell the property to a non-inheritor, then a transfer duty will be assessed.
Also if a person wishes to transfer half of their primary residency to a spouse, whereby the two will retain equal shares of the property and continue to occupy it as their primary residence, the transfer duties do not apply.
Exemptions also are available for transfer of property to qualified charitable organisation and several other legislated instances. A conveyancer will have knowledge of these various exemptions to understand if they apply in your property transaction.
Protecting Your Interests
These various concession and exemptions to transfer duties could give the average person a headache if they try to accurately calculate their transfer duty cost on a property transaction.
Conveyancers and solicitors who deal in property transfers deal with these laws every day and know all the nuances.
While you may feel you can save money by handling all the paperwork on your property acquisition, you may miss out on some of the concessions and/or exemptions that a conveyancer will apply for you, thereby losing money where you thought you were saving. Not to mention all the time you spend trying to understand the various options.
Talk to the professionals at Titlexchange to ensure you are getting the best representation on your property settlement, whether buying, selling or working on a transfer.