Stamp Duty in Australia: 2022 Definitive Guide

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Stamp Duty in Australia: 2022 Definitive Guide

For the majority of home buyers, paying Stamp Duty in Australia is an unavoidable step in property ownership. It is arguably the single most expensive cost you’ll have to pay in acquiring a property, whether that be a house, vacant land or off-the-plan apartment.

So what exactly is Australian Stamp Duty?

Stamp duty is a tax charged by the Australian states and territory governments on certain documents and transactions –  the main one being property transactions.

The States collect the tax and spends it on infrastructure, public facilities, and healthcare, amongst other things.

How much is Stamp Duty in Australia for properties?

The Australian Stamp Duty rates for most properties typically range between 4% to 5% of your property’s value.

E.g. If your property purchase price is $1,000,000 then the Stamp Duty rate payable is approximately $40,000 – $50,000.

The Australian Property Stamp Duty is calculated based on three core variables: 

  1. The property purchase price, 

  2. Location, e.g. NSW 

  3. Intended purpose, e.g. Primary residence or investment

Each State Government has its way of calculating the stamp duty tax rate so figures will vary depending on the variables you enter. 

Try our Australian Stamp Duty Calculator!

  • First Home Buyer means that it’s the first time you bought a home that you will be living in for at least 6 months of the first 12 months of ownership. For an Australian expat, this is usually always ‘No’.
  • Foreign Purchaser means that you are not an Australian citizen or Australian Permanent Resident. If you are an Australian expat, you are not a Foreigner Purchaser.
  • Transfer fee is a state government fee for updating the land’s ownership title records to your name.
  • Mortgage fee is another government fee for registering your mortgage and the lender as mortgagee on your property.

Note: The Australian Stamp Duty cost vs. property price relationship is not linear. The higher the property value, the more Stamp Duty tax payable percentage-wise.

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When do you have to pay the Stamp Duty in Australia?

This will vary from State to State. 

Your appointed conveyancer, solicitor or settlement agent will advise you and assist with the payment of the Stamp duty to the State’s Revenue Office (SRO).

If you are obtaining a mortgage, the Stamp Duty tax is usually paid on the day of settlement by the solicitors. By using the funds available at settlement, either from the loan proceeds or from your contributions.

The Australian Property Stamp Duty Deadlines:

StateDeadline
NSWStamp Duty is to be paid to the SRO within 90 days of settlement. If purchasing off-the-plan, Stamp Duty is payable within 90 days of signed contract date.
VICStamp Duty is to be paid to the SRO within 30 days of settlement.
QLDStamp Duty is to be paid to the SRO within 30 days of settlement.
WAStamp Duty is to be paid to the SRO within 30 days of receiving the Duties Assessment Notice. To receive the Assessment Notice you’ll first have to lodge your Transfer documents to the SRO within 60 days of the settlement.
NTStamp Duty is to be paid to the SRO within 60 days of entering into a transaction or settlement, whichever is earlier.
SAStamp Duty is to be paid to the SRO on the day of settlement.
TASStamp Duty is to be paid to the SRO within 90 days of settlement.
ACTStamp Duty is to be paid to the SRO within 14 days of receiving the Notice of Assessment. To receive the Assessment Notice you’ll first have to lodge your Transfer documents to the SRO within 14 days of the settlement.

Australian Stamp Duty for Foreign Buyers – Do you need to pay it?

In the last few years, the State Governments have imposed additional Stamp Duty of up to 8% for anyone who is a foreign buyer. 

This surcharge gets added on top of the standard Stamp duty. 

There is currently no Foreign Buyers Stamp Duty Surcharge in the Northern Territory and the ACT. In NSW and VIC, it’s 8%, and for the rest of the states, it is 7%. 

Note: You are not a Foreign Buyer if you are an Australian Citizen or an Australian Permanent Resident, even if you reside overseas.

Australia Stamp Duty surcharge is common practice amongst other developed countries to help curb the strong demand for foreign investment in residential properties, control housing affordability, and generate extra tax revenue.

Countries such as Hong Kong, Singapore and Canada have implemented similar measures with comparatively harsher fees as high as 20% additional Stamp Duty on top of the standard fee!

Note: If you are an Australian citizen purchasing a property jointly with your spouse, who is a foreign national, take heed!

Australian property Stamp Duty for foreigners will apply to half of the property’s value which can be an unexpected shock.

Two scenarios:

  1. Foreign national buys a $1,250,000 property in NSW; this would equate to a standard  Stamp duty of $54,052 plus Foreign Buyers Duty of $100,000 for a total of $154,052.

  2. Australian citizen buys a $1,250,000 property in NSW with a foreign spouse, jointly owned 50/50.  This would equate to a standard Stamp Duty of $54,052 plus Foreign Buyers Stamp Duty of $50,000 for a total of $104,052.

The alternative is to purchase in the Australian spouse’s name and only have to pay the standard Australian Stamp Duty tax of $54,052. 

In some cases, you’ll still be able to have your foreign national spouse on the home loan application if you need to show more income for borrowing capacity. They won’t appear on the title of the property.

Note: Anyone that is on the mortgage application will be liable for the mortgage repayments even if they are not on the title.
 
In cases of divorce, Family Law Court will ultimately decide who gets what as opposed to who’s on the title of the property.

How to reduce or avoid paying Australian Stamp Duty altogether

In some circumstances, you may be able to get a concession or exemption from paying property Stamp Duty. 

If you are residing overseas, it’s highly unlikely you’ll be eligible for the First Home Owners Stamp Duty concessions, as you’ll need to be living in the property for at least six months of the first year of ownership.

But fret not.

You can purchase multiple investment properties in Australia while overseas and still be eligible for the First Home Owner benefits once you return to Australia.

Australian Stamp Duty Tax Concessions and Exemptions

COVID-19 recovery plan – (1st August 2020 – 31st July 2021)
First time home owners purchasing primary residence (new homes only):

Purchase price <=$800,000 = Stamp duty exempt
Purchase price $800,001 – 999,999 = Stamp duty concession
Purchase price $1 million+ = No concession

———————————————

First time home owners purchasing primary residence (established):
Purchase price <=$650,000 = Stamp duty exempt
Purchase price $650,001 – 799,999 = Stamp duty concession
Purchase price $800k+ = No concession

First time home owners purchasing vacant land (to later build on):
Purchase price <=$400,000 = Stamp duty exempt
Purchase price $400,001 – 499,999 = Stamp duty concession
Purchase price $500k+ = No concession

First time home owners purchasing primary residence:
Purchase price <=$600,000 = Stamp duty exempt
Purchase price $600,001 – 749,999 = Stamp duty concession
Purchase price $750k+ = No concession

Pensioners, farmers, and those purchasing from a plan are also eligible for Stamp duty concessions or exemption to varying degrees.
First time home owners purchasing primary residence:
Purchase price <=$500,000 = Stamp duty exempt
Purchase price $500,001 – 549,999 = Stamp duty concession
Purchase price $550k+ = No concession

First time home owners purchasing vacant land (to later build on):
Purchase price <=$250,000 = Stamp duty exempt
Purchase price $250,001 – 399,000 = Stamp duty concession
Purchase price $400k+ = No concession

First time home owners purchasing primary residence:
Purchase price <$430,000 = Stamp duty exempt
Purchase price $430,000 – 530,000 = Stamp duty concession
Purchase price >$530,000 = No concession

First time home owners purchasing vacant land (to later build on):
Purchase price <=$300,000 = Stamp duty exempt
Purchase price $300,001 – 399,000 = Stamp duty concession
Purchase price $400k+ = No concession

Currently there is a 75% stamp duty discount for anyone purchasing off-the-plan (pre-construction) until 23rd October 2021
Other types of exemptions apply to family farms transactions between family members.
First time home owners purchasing primary residence can get $18,601 off their stamp duty.
This equates to $430,000 stamp duty exempt.
$430,000 – $650,000 = $18,601 discount
>$650,000 = no concession.

There are also exemptions and discounts for seniors, pensioners, or carers.
There are no Stamp Duty exemptions of concessions. South Australia currently has the highest Stamp Duty of any State.
First home buyers and Pensioners in Tasmania can receive a 50% concession on stamp duty when purchasing a property value up to $400,000 until 30th June 2020.

Stamp duty exemption also applicable for married couples who are transferring primary residence property from sole name into joint names.
The ACT offers the Home Buyer Concession Scheme for home buyers buying new properties, established properties or vacant blocks of land (from 1 July 2019).

There are a number of conditions, including that the applicant/s can not have held an interest in any land in the last two years.
 
They’ll also need to live in the property for at least one year after buying it.

They also need to have an income which is lower than the threshold. For those with no dependent children, this threshold is $160,000 for the year prior to the property transfer, grant or agreement of property transfer – whichever is first. For those with one child, it’s $163,330.

Other Stamp Duty exempt scenarios:

In cases of divorce where mandated by Court order, Stamp Duty tax will be waived when transferring properties to the other party.

If a family member passed away and in their Will, it’s stated the properties are to be passed down to you, the property Stamp Duty will also be waived. 

Note: There is no concession for gifting property from one person to another. Even if a family member sold you one of their properties for $1, the State government would send a third party valuer to obtain the market value of that property, and you will be charged the Australian Stamp duty rates accordingly.

How to borrow the entire Australian Stamp Duty in your home loan

In most cases, the banks will only lend you up to 80% of your property’s value which means you’ll still need to come up with the remaining 20% deposit yourself, plus the 4% – 5% Stamp Duty rate, so the total contribution required is approximately 25%.

Using an example of a $1,000,000 property, you’ll need $250,000 for your contribution.

So how can you come up with that $250,000?

Method 1 - Releasing Equity (Top-up/cash out) from an existing property to pay the Stamp Duty tax

If you have an existing Australian property, you can offer that property as additional security and the bank will allow you to borrow against that property up to 80% of its value.   

Example:

  1. You have an existing property worth $500,000 with a current loan balance of $150,000.

  2. The bank will allow you to borrow up to 80% of the value so a maximum potential loan of $400,000.

  3. You top up your loan from $150,000 to $400,000 which is a $250,000 cash out or equity which you then take and pay for the remainder of the first purchase effectively borrowing the entire amount of the purchase and the stamp duty.

Method 2 - Family Guarantor home loan to help pay the Stamp Duty rate

This method doesn’t require you to have any existing properties, but it does rely on your parents having one.  

It’s the same concept as the first method. Your parents offer their property as additional security to the bank and assuming there’s sufficient equity available in their property; the bank will allow you to borrow up to 80% of the value.

Method 3 - Lender’s Mortgage Insurance (LMI) to support the Australian Stamp Duty charge

You can borrow up to 90% of the property’s value by paying LMI to the bank. If you borrow 80% or lower, there is typically no LMI fee payable.

If you borrow 90%, the LMI fee would be approximately 2-3% of the property value and gets added on top of the loan amount. 

In the case of the $1,000,000 purchase, you could borrow $900,000 by adding a $20,000-30,000 LMI fee on top of your loan. So your total loan amount would be $920,000-930,000.

Paying LMI is only something we’d recommend if you can’t do the first two methods, you don’t have sufficient savings/deposit, and you want to enter the property market sooner rather than later.

Final Words on Australian Property Stamp Duty

Lack of foresight into the cost of Australian Stamp Duty and Stamp Duty for foreign buyers can derail your property buying journey and in some cases give you a nasty surprise after signing an unconditional purchase contract, especially if there’s a foreign citizen involved.

That said, the hefty tax bill is mostly unavoidable. To ease the pain, look at it as your tax-deductible donation to the State government in their efforts to make Australia a more desirable place to live!

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