Frank Valentic from Advantage Property Consulting runs us through the basics on one of the least-fun parts of buying a property: government duty.
Stamp duty is basically a tax that every property purchaser has to pay when they buy. It can be applied to a whole range of things including loans, some insurance and even gifts. The amount you have to pay is based on a percentage, depending on the state you buy in, but essentially the more expensive the property, the more you have to pay in stamps.
Those entering the property market for the first time can get caught up in the excitement of living the Australian dream, but ensuring that you budget for your stamp duty will save a lot of stress in the long run.
When do I pay my stamp duty?
If it is in relation to real estate, your stamp duty must be paid within 30 days of the settlement of your property, which is why we recommend ensuring you run all your numbers while budgeting, to take added costs to the purchase price into consideration.
What is this money used for?
The money gets put back into the economy by the state you purchased in. This pool of money is added to their budgets for things such as roads, health emergency services and transport.
How do I calculate my stamp duty?
As each state is different, we recommend using region-specific online calculators. These will take into consideration the state you are buying in, whether you are purchasing your first home or an investment, and if you are a foreign buyer. For buying in Victoria, try the State Revenue Office Victoria.
Should I buy off the plan to save stamp duty?
We hear of so many people making their decision to buy an off-the-plan property to obtain stamp duty savings. If buying off the plan, a first homebuyer purchasing under $750,000 could be eligible for deductions; however we advise you to be very careful that this is not your sole motivation for buying.
With so many conditions in the contracts and many off the-plan properties not increasing in capital growth, you need to do your research. You may save a bit upfront, but it could cost you a lot when you go to sell.