What is stamp duty, and how does it work?

If you’re in the home buying process, then you’ve probably heard about stamp duty. Stamp duty can be a significant home-buying cost to budget – and unfortunately, your home loan does not cover it. How much stamp duty costs varies by location, property value, and buyer.

Let’s get into what you need to know.

Stamp duty (also known as transfer duty) is a one-off property tax levied by state and territory governments on home purchases. Stamp duty is paid by the buyer on both owner-occupier and investor homes. 

Stamp duty differs for each state, property, and home buyer because it’s a state-based government tax. However, it can cost tens of thousands of dollars.

For instance, Mozo’s stamp duty calculator shows that a property in NSW bought for $500,000 as someone’s primary residence costs $17,235 – so long as they aren’t a first home buyer. 

However, a Victorian home buyer getting a property at that same price would have to pay $21,970. In Queensland, their stamp duty would cost only $8,750.

Stamp duty is calculated using the property value, the buyer’s history, and the local state or territory government rules. More expensive properties have higher stamp duty costs. 

However, first home buyer grants mean that many Australians pay low or no stamp duty, up to a certain threshold, depending on the property type. You can check your eligibility using our first home buyer stamp duty calculator. 

Otherwise, if you’ve owned property in the last ten years, you’re on the hook for stamp duty.

Since stamp duty is varied depending on the state or territory government, exemptions and concessions are up to the government of the properties location. 

New South Wales

• First Home Buyer Assistance Scheme: Exemptions for new and existing properties up to $800,000 and concessional rates for properties over $800,000 and less than $1,000,000.
• First Home Buyer Choice: Allows eligible first-time buyers to choose between paying stamp duty or an annual property tax.

Victoria

• First Home Buyer Duty Exemption or Concession: Exemptions for properties up to $600,000 and concessional rates for properties over $600,000 up to $750,000.
• Principal Place of Residence Concession: Concessional rates for properties valued up to $550,000.

Queensland

• First Home Concession: Concessional rates for properties under $550,000.
• Home Concession: Concessional rates for properties valued up to $350,000.

Western Australia

• First Home Owner Rate of Duty: Concessional rates for properties where the combined value of land and property value of under $530,000.
• Off-the-Plan Duty Rebate: At property prices of $650,000 or less, 100 per cent of the duty paid or payable which is capped at $50,000.

South Australia

• Stamp Duty Relief for First Home Buyers: Can reduce stamp duty to zero for properties up to $650,000 (or $400,000 for vacant land). Partial reduction when under $700,000 (or $450,000 for vacant land).

Tasmania

• First Home Buyer Duty Concession: $600,000 until 30 June 2024 (T&Cs apply).
• Pensioner Duty Concession: A 50% discount on stamp duty for eligible pensioners on property values of $600,000 or less up until 30 June 2024.

Australian Capital Territory

• Home Buyer Concession Scheme: An exemption from paying stamp duty for unit-titled apartment and townhouses worth up to $700,000.

Northern Territory

• First Home Owner Discount: A discount of up to $18,601 on stamp duty for first-time buyers with a property value of $650,000 or less.
• Principal Place of Residence Rebate: A rebate for non-first home owners of up to $7,000 for the purchase of a principal place of residence on the purchase of a new home or the land where a new home is being built.

Stamp duty is a significant cost that home buyers need to consider when purchasing a property, as it can have a substantial impact on home loans and the overall purchasing process. 

This additional expense can significantly impact a buyer's borrowing and purchasing power. For example, if a buyer has saved $100,000 for a deposit, but the stamp duty on their desired property is $20,000, they may need to either borrow more money - or look for a less expensive property. The added cost of stamp duty can effectively reduce the amount a buyer can spend on the property itself, which may limit their options in the market.

Buyers without access to a concession will need to budget for stamp duty alongside other costs, such as the deposit, legal fees, and mortgage registration fees. Failing to account for stamp duty can lead to difficulty in securing the necessary funds to complete the purchase. Some buyers may need to save for a longer period or explore alternative financing options to cover the additional expense of stamp duty.

In most cases, the payment of stamp duty is arranged through a solicitor or conveyancer who is responsible for handling the legal aspects of the property transaction.

The solicitor or conveyancer will calculate the amount of stamp duty payable based on the purchase price of the property and the applicable stamp duty rates in the state or territory where the property is located. They will then coordinate with the buyer to make sure that the necessary funds are available for payment at settlement. 

It’s important to keep the deadline in mind as late payments may incur penalties or interest charges. 

When you pay stamp duty depends on the state or territory. Usually, buyers pay stamp duty between 1 to 3 months after signing the contract of sale and completing the home loan settlement. 

Here are a few of the timeframes:

• In NSW, home buyers must pay stamp duty within 3 months of settlement.
• In VIC and QLD, home buyers must pay stamp duty within 30 days of signing the contract of sale.
• In SA, home buyers must pay stamp duty before getting registered on the certificate of title (i.e. before settlement). 

Some eligible home buyers may be able to defer their stamp duty payment for 12 months, but this isn’t the case everywhere. Check the rules of your local state or territory government.