Saving up for a home deposit is often top of the to-do list when you’re buying a home. But many first home buyers make the mistake of forgetting to budget for the other expenses that are part of the purchase. The biggest one is usually stamp duty, so it’s important to understand what you need to pay and when you need to pay it, so you can budget accordingly.
Stamp duty is a state-imposed tax that pays for the transfer of property from one owner to another. This is a compulsory tax that is levied on a number of purchases like cars and businesses, but it’s most commonly known as the tax you pay when you buy a house or land. This is why it is sometimes referred to as Transfer of Land duty.
Because stamp duty is a state tax, the amount you pay depends on which state you are in. Typically, the cheaper the property, the less stamp duty involved, but other factors come into play like the type of property you’ve purchased, whether you will be living there as your prime residence and whether you are an Australian citizen.
To get a sense of how much you’ll need to pay in Victoria, use the Victorian State Revenue Office Land Transfer (Stamp) duty calculator. As a general rule of thumb though, it’s a good idea to budget at least 4% of the purchase price of your property.
Different states in Australia have different payment terms for stamp duty. In Victoria, you are required to pay within 30 days of settlement of your new purchase.
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If you buying your first home you might be eligible for stamp duty exemption. The current Victorian policy says that if this property is your principal place of residence and you live in it for at least twelve months, you will pay no stamp duty when you buy a property for $600,000 or less. As the price of your property increases above this amount, there will be a reduced stamp duty on a sliding scale. You can find all the details on the Victorian State Revenue Office First Home Buyer Duty Exemption page.
Victoria offered duty reductions for eligible first home buyers ranging from 20 to 40 percent between 2011 to 2014. If you were eligible and settled on your property on or after 1 July 2011 and before 1 September 2014 but did not receive this reduction, you may be entitled to a refund which you can apply for at the Victorian State Revenue Office duty refund page.
The Victorian government does offer off-the-plan concessions to some first home buyers. However, there are a number of requirements that are outlined on the Victorian State Revenue Office Off-the-plan duty concession page.
When you buy your property, your conveyancer, solicitor or bank will normally organise and pay the duty on your behalf. Of course, it’s always good to confirm that it has been paid by asking them for a duty statement.