Stamp duty is one of those extra costs that is rather easy to forget when you’re buying property but can really add up to your total cost.
It is tempting to dismiss it when deciding what you’re willing to pay for your next Investment property but don’t fall into a trap.
Depending on the property, or asset, you could be looking at tens of thousands of dollars in stamp duty to pay in quite a small timeframe.
Our greatest recommendation is to have stamp duty in mind when setting your budget.
The more you’re willing to pay for the Investment property, expect to pay more stamp duty on top of this.
Knowing how much you can afford comes down to you doing your research.
What is Stamp Duty?
To put it simply, stamp duty is a tax that you’ll sometimes be required to pay on legal documents.
You’ll find stamp duty applied to a number of acquisitions including real estate, cars, shares and business assets or on contracted services
such as loans, gifts and some insurance policies.
Unfortunately, it’s unavoidable so make sure you consider these charges when you’re calculating the affordability of a purchase.
Stamp duty is a state based tax and can vary vastly from state to state depending on purchase prices and what you are purchasing.
Please see the overview below for the differences between the states and how much these can vary.
Who Has to Pay It?
Depending on the transaction at hand, it may be the purchaser or the buyer who is required to pay the tax.
In the case of property purchase, it is the buyer who is obligated to pay stamp duty.
If you’re working with a solicitor or conveyancer, they will pay the stamp duty on your behalf but be sure to confirm this payment and ask for a duty statement for your own reference and peace of mind.
Depending on your lender and loan type, stamp duty may be included in the amount that you borrow.
Regardless of whether or not you pay the money upfront or borrow it, you’ll need to lodge relevant statutory forms with original documents, supporting information and of course payment.
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.
How Much Does It Cost?
How much you pay really depends on where you live and what your circumstances are.
Generally, stamp duty will be calculated from the cost of the Investment property.
The more you pay for the property or the more it’s worth, whichever is higher, the more the stamp duty.
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.
Northern Territory doesn’t follow this threshold system and instead employs a formula to work out the payable stamp duty.
There are also a number of concessions that you may be eligible for depending on your circumstances.
These also differ from state to state but include:
- First Home Buyers
- Those handing over family farms
- Those intending to make the property their Principle Place of Residence (PPOR)
- Those purchasing off-the-plan sales
- Beneficiaries of a deceased estate
- Those who have been gifted property from his/her spouse
To find relevant concessions, have a look at your state’s eligibility criteria and rates in the links provided below.
Overview of Rates by State
New South Wales
Due to the diversity of the rules and regulations for stamp duty from state to state, our recommendation is to do your research.
You might even find it useful to put your number in an online Stamp Duty Calculator.
Subscribe & don’t miss a single episode of Michael Yardney’s podcast
Hear Michael & a select panel of guest experts discuss property investment, success & money related topics. Subscribe now, whether you're on an Apple or Android handset.
Need help listening to Michael Yardney’s podcast from your phone or tablet?
We have created easy to follow instructions for you whether you're on iPhone / iPad or an Android device.
Prefer to subscribe via email?
Join Michael Yardney's inner circle of daily subscribers and get into the head of Australia's best property investment advisor and a wide team of leading property researchers and commentators.