You’ve definitely heard about stamp duty, also known as transfer duty, if you’re planning to buy a home. But what exactly is it, and how does it affect you?
Simply put, stamp duty is a tax that we must pay when we purchase a home. The exact amount is determined by your state or territory of residence and the purchase price of the property, with some exceptions. Stamp duty costs Australians tens of thousands of dollars on average, says the real estate agents Donnybrook. This is in addition to the mortgage, deposit, and other costs associated with purchasing a home.
Stamp duty cost
Which state or territory do you live in?
Each state and territorial government sets its own stamp duty. This means that rates, price bands, and exemptions vary by state and territory.
How much is the house you’re buying?
The value of your home is a major consideration when calculating stamp duty. The amount you owe is determined by brackets for house values in each state and region.
Are you entitled to any exemptions?
You might be eligible for a stamp duty exemption before having to pay tens of thousands of dollars in taxes.
When do I have to pay stamp duty?
The timeframe in which you must pay stamp duty varies from state to state, just as the stamp duty rate.
NSW – within three months of signing a sale or transfer contract.
Within 30 days of settlement in Queensland.
VIC – within 30 days of your new purchase’s settlement.
ACT – within 14 days of obtaining a Notice of Assessment and after settlement.
TAS – within three months of the property being transferred
NT – 60 days after settlement
SA has reached an agreement.
WA – one month after receiving a responsibilities assessment notice.
The issues with stamp duty
An out-dated tax
The stamp duty tax originated under an earlier governmental system. Land transfers were less prevalent, and property records were not as detailed as they are now. Furthermore, the real process of officiating a transaction and stamping the documentation took more time from the government. Stamp duty was thus an inefficient mechanism for the government to ensure that property owners paid taxes, but things have changed dramatically since then. Governments have comprehensive and up-to-date documentation of every bit of land in their state or territory, making the procedure much easier for them.
The cost of stamp duty
Property is easily one of the most major purchases made by the ordinary Australian. Many of us are pursuing this great ambition. However, there is a significant cost barrier to overcome. Property prices have risen dramatically in recent decades, and are now significantly more than the average wage. As a result, stamp duty is not only a high tax, but it also arrives at a time when the gap between the average wage and the average house price is bigger than it has ever been.
The cost of stamp duty, maybe most critically, causes various behavioural changes. Anyone attempting to enter the real estate market will face significant additional costs. Not only that, but it’s a significant impediment to anyone trying to relocate. A growing family may decide to stay in their current home and try to renovate or extend it in order to avoid paying stamp duty again. Similarly, retirees frequently stay in homes that aren’t suitable for their requirements merely because downsizing would result in significant tax savings.