We all know stamp duty exists, but exactly what it is or why it exists is often lost in translation. So we’re going to go back to the basics today and lay down everything you need to know about stamp duty.
What is stamp duty?
Stamp duty is a tax paid to a state or territory government by a purchaser on certain acquisitions. In Australia, it is the law that stamp duty is paid on property transfers, mortgages, motor vehicle registration and transfers, leases, hire purchase agreements and insurance policies. It can be called stamp duty, transfer duty or general duty. When related to property and real estate, it is known as stamp duty.
How much is it?
The stamp duty fee varies from state to state in Australia, however all up it adds up to a healthy portion of state government revenue. In 2015 The Conversation reported that stamp duty paid on the transfer of property generated $16 billion income for the state governments. In Queensland, where the majority of the properties we work with are, the stamp rate is calculated with different rates based on the value of the property. For example, for property’s with a purchase price up to $350,000 the applicable rate is $1.00 for each $100 or part of $100 paid. However, for properties with a purchase price between $540,000 and $1,000,000 the applicable rate is $10,150 plus $4.50 for every $100 or part of $100 over $540,000. So actually calculating the rate can be quite confusing.
When do you pay it?
For property purchases, stamp duty must be paid by the purchaser within 30 days of the property settlement.
So how does this information fit in with you and your next purchase? It comes down to planning. When you plan your next property purchase, you want to factor any applicable stamp duty into your finances well in advance so you don’t get a nasty surprise. If you factor it in prior to your mortgage approval, the bank may provide the stamp duty costs in the mortgage (conditions will apply) and release them to you when required.
It’s important to know about stamp duty and consider the costs before you put an offer on a property, because you want the process to be as smooth sailing as possible- and we’re here to help with that.