There are many costs involved when buying an investment property in Australia, and stamp duty is one which is often overlooked… but it can really make a difference to your total cost.
Depending on the property you could be liable to pay tens of thousands of dollars in stamp duty soon after the contract is signed.
So to avoid falling into the stamp duty trap (of coming up short), you should make sure to factor it into your budget from day 1.
And remember too, the more you will pay for your investment property, the higher the stamp duty fee will be.
So, knowing how much you can afford to spend on an investment (or your new home for that matter) comes down to you doing your research.
What is stamp duty on a property?
Stamp duty - also known as transfer duty - is a state-based tax that you’ll sometimes be required to pay on purchasing assets such as property, land, cars, shares, business assets or even contracted services such as loans, gifts, and some insurance policies.
It’s essentially a transfer fee paid by the property buyer to transfer the property title from the seller's name into their name.
The amount you have to pay differs vastly depending on the state the property is in, the sale price, and what it is you’re buying.
Stamp duty is a massive source of revenue for state governments and as this tax, significantly adds to the price of property at a time when breaking into the housing market is hard enough, there are regular calls to scrap this impost.
It not only makes it harder for first-home buyers, but it also acts as a barrier to older Aussies’ downsizing.
Later on in this article, I’ll give a rundown of how stamp duty differs in each state.
Who pays stamp duty when selling a house?
In the case of property or land purchases, the buyer is the person who pays stamp duty when a house is sold.
And, when do you need to start paying stamp duty on a property?
Within 30 days of signing the contract or settlement (depending on which state you’re in)… or you’ll incur a penalty tax or interest.
If you’re working with a solicitor or conveyancer, they will organize the stamp duty payment on your behalf but be sure to confirm the payment has occurred and ask for a duty statement for your own reference and peace of mind.
What you need to lodge in order to comply with stamp duty obligations is very much dependent on the relevant jurisdiction.
Do your own research and talk to an industry professional to ensure you aren’t leaving anything out.
Can stamp duty be added to the mortgage?
No, stamp duty is an initial cost so lenders ask borrowers to support this cost through other means, such as personal savings.
However, while you cannot add stamp duty to your mortgage, you may be able to increase the amount of your home loan to cover the cost of stamp duty.
This could make up for the amount that you will need to pay in cash.
When it comes time to pay, you’ll need to lodge relevant statutory forms with the fee, original documents, and supporting information.
Is stamp duty higher on a second home?
As the cost of stamp duty is associated with the price of the property and the state it is located, the fee is the same whether a buyer is purchasing their first, second, third, etc. property.
There is no higher stamp duty on a second home, but the stamp duty on an investment property may be higher than that for a principal place of residence.
How much does it cost?
The exact amount stamp duty will cost depends on two things:
- Where you live
- The purchase price of the property
Stamp duty will be calculated from the cost of the property you buy so the more you pay for the property or the more it’s worth, whichever is higher, the more the stamp duty will cost you.
Much like your taxable income, stamp duty is often determined on a sliding scale.
Whichever threshold your property value falls under is the percentage you’ll pay in tax.
If you’re a foreign investor, however, you’ll be expected to pay a much higher rate - up to 8% depending on the state you’re buying in.
While there are many federal and state government concessions that are designed to help first home buyers and owner occupiers buy a property and at times lower their stamp duty obligation, there aren’t any stamp duty concessions available for investors buying properties.
Most state governments have online calculators to help you estimate the amount of stamp duty you’ll be expected to pay on your investment property, but here is a breakdown of cost brackets for each Aussie state.
Stamp duty rates in Victoria
Stamp duty in Victoria starts at 1.4% for properties valued up to $25,000 and up to 6.5% for properties valued over $960,000.
Stamp duty rates for buying a non-principal place of residence in Victoria are as follows:
| Property value | Stamp duty (transfer) rate |
|---|---|
| $0 – $25,000 | 1.4% of the dutiable value of the property |
| $25,001 – $130,000 | $350 plus 2.4% of the dutiable value in excess of $25,000 |
| $130,001 – $960,000 | $2870 plus 6% of the dutiable value in excess of $130,000 |
| $960,001 – $2,000,000 | 5.5% of the dutiable value |
| Over $2,000,000 | $110,000 plus 6.5% of the dutiable value in excess of $2,000,000 |
Stamp duty rates in New South Wales
Stamp duty in New South Wales starts at 1.25% for properties valued up to $15,000 up to 163,940 plus 7% for premium properties valued over $3,268,000.
Stamp duty rates for properties in New South Wales are as follows:
| Property value | Stamp duty (transfer duty) rate |
|---|---|
| $0 to $15,000 | $1.25 for every $100 (minimum $10) |
| $15,000 to $32,000 | $187 plus $1.50 for every $100 over $15,000 |
| $32,000 to $87,000 | $442 plus $1.75 for every $100 over $32,000 |
| $87,000 to $327,000 | $1,405 plus $3.50 for every $100 over $87,000 |
| $327,000 to $1,089,000 | $9,805 plus $4.50 for every $100 over $327,000 |
| Over $1,089,000 | $44,095 plus $5.50 for every $100 over $1,089,000 |
| Premium, over $3,268,000 | $163,940 plus $7.00 for every $100 over $3,268,000 |
Stamp duty rates in Queensland
Stamp duty in Queensland starts at 1.5% for properties valued between $5,001 and $75,000, up to $38,025 plus 5.75% for properties over $1 million.
Stamp duty rates for properties in Queensland are as follows:
| Property Value | Stamp duty (transfer duty) rate |
|---|---|
| $0-$5,000 | $0.00 (No stamp duty) |
| $5,001 to $75,000 | $1.50 for each $100, or part of $100, over $5,000 |
| $75,001 to $540,000 | $1,050 plus $3.50 for each $100, or part of $100, over $75,000 |
| $540,001 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 |
Stamp duty rates in Northern Territory
The stamp duty rates are calculated differently in the Northern Territory versus all other states.
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Where the property value is below $525,000, it is calculated using a complex formula as follows:
D = (0.06571441 x V² ) + 15V
D is the duty payable in $ and V is 1/1000 of the property’s dutiable value.
For example, if you were buying a property valued at $400,000 in the NT, the calculation would be:
$(0.06571441 x $400,000/1000 ²) + 15 x $400,000/1,000
Which equates to $10,514.30 + 6,000
Stamp duty = $16,514.30
For property valued over $525,000, a flat percentage of the property value is applied as stamp duty.
The stamp duty rates for property in the Northern Territory are as follows:
| Property value | Stamp duty (transfer duty) rate |
|---|---|
| Up to $525,000 | D = (0.06571441 x V² ) + 15V |
| $525,000-$2,999,999 | 4.95% of the property’s dutiable value |
| $3,000,000-$4,999,999 | 5.75% of the property’s dutiable value |
| More than $5,000,000 | 5.95% of the property’s dutiable value |
Stamp duty rates in South Australia
Stamp duty in South Australia starts at 1% for properties valued under $12,000, up to $21,330 plus 5.5% for properties valued over $500,000.
Stamp duty rates for properties in South Australia are as follows:
| Property value | Stamp duty (transfer duty) rate |
|---|---|
| Does not exceed $12,000 | $1.00 for every $100 or part of $100 |
| Exceeds $12,000 but not $30,000 | $120 plus $2.00 for every $100 over $12,000 |
| Exceeds $30,000 but not $50,000 | $480 plus $3.00 for every $100 over $30,000 |
| Exceeds $50,000 but not $100,000 | $1,080 plus $3.50 for every $100 over $50,000 |
| Exceeds $100,000 but not $200,000 | $2,830 plus $4.00 for every $100 over $100,000 |
| Exceeds $200,000 but not $250,000 | $6,830 plus $4.25 for every $100 over $200,000 |
| Exceeds $250,000 but not $300,000 | $8,955 plus $4.75 for every $100 over $250,000 |
| Exceeds $300,000 but not $500,000 | $11,330 plus $5.00 for every $100 over $300,000 |
| Exceeds $500,000 | $21,330 plus $5.50 for every $100 over $500,000 |
Stamp duty rates in Western Australia
Stamp duty in Western Australia starts at 1.9% for properties valued up to $120,000, up to $28,453 plus 5.15% for properties valued over $725,000.
Stamp duty rates for properties in Western Australia are as follows:
| Property value | Stamp duty (transfer) rate |
|---|---|
| $0 – $120,000 | $1.90 per $100 or part thereof |
| $120,001 – $150,000 | $2,280 + $2.85 per $100 or part thereof above $120,000 |
| $150,001 – $360,000 | $3,135 + $3.80 per $100 or part thereof above $150,000 |
| $360,001 – $725,000 | $11,115 + $4.75 per $100 or part thereof above $360,000 |
| Over $725,001 | $28,453 + $5.15 per $100 or part thereof above $725,000 |
Stamp duty rates in Tasmania
Stamp duty in Tasmania starts at $3,000 for properties valued up to $50, up to $27,810 plus 4.5% for properties valued over $725,000.
Stamp duty rates for properties in Tasmania are as follows:
| Property value | Stamp duty (transfer) rate |
|---|---|
| Up to $3,000 | $50 |
| Between $3,001 and $25,000 | $50 + $1.75 for every $100, or part by which dutiable value exceeds $3,000 |
| Between $25,001 and $75,000 | $435 + $2.25 for every $100, or part, by which dutiable value exceeds $25,000 |
| Between $75,001 and $200,000 | $1,560 + $3.50 for every $100, or part, by which the dutiable value exceeds $75,000 |
| Between $200,001 and $375,000 | $5,935 + $4.00 for every $100, or part, by which the dutiable value exceeds $200,000 |
| Between $375,001 and $725,000 | $12,935 + $4.25 for every $100, or part, by which the dutiable value exceeds $375,000 |
| Over $725,000 | $27,810 + $4.50 for every $100, or part, by which the dutiable value exceeds $725,000 |
Note: While there are several costs associated with buying property other than the sale price alone, by understanding what these are and budgeting for them from the outset, homebuyers and investors can sit back and watch their assets grow in value over time.
The most important place to start is by doing your research and ensuring that you are budgeting with all the costs in mind to ensure you don’t fall into the trap of falling short of funds for your stamp duty bill.
