What is stamp duty?
Stamp duty is a transfer duty imposed by the State Revenue Office when you purchase or acquire a property in the state of Victoria. The duty amount payable will depend on a variety of factors including the purchase price in which you purchase the property for, whether there are any exemptions or concessions applicable to the transaction and whether you are a foreign purchaser.
Types of exemptions and concessions
When purchasing property in Victoria, a purchaser may be entitled to one or more of a variety of exemptions or concessions. These include the following:
First Home Owner Grant
This grant is dependent upon when the purchaser executes the contract of sale for a new dwelling. A new dwelling includes purchasing land and constructing a new dwelling or purchasing an existing residential property which has not previously been occupied as a residential property. At present, there is a one-off grant of $10,000.00 (or $20,000.00 within regional Victoria) for dwellings valued up to $750,000.00.
First Home Buyer Duty Exemption or Concession
This exemption or concession is applicable for all contracts executed after 1 July 2017. If the purchase price does not exceed $600,000.00 than the one-off duty exemption will apply. If the purchase price is between $600,001.00 and $750,000.00 than a concessional rate will be applied if the property is intended to be your principle place of residence.
First Home Buyer Reduction
This one-off reduction is applicable for all contracts executed after 1 July 2017. This is a reduction of up to 50% for a principal place of residence up to the value of $600,000.00.
This concession deducts the construction or refurbishment cost of the property from the purchase price under the contract of sale. It is important to note that this concession is no longer applicable for contracts signed after 1 July 2017 if the property is not intended to be your principle place of residence.
If the applicant holds an approved concessional card than they will be eligible for exemption for the purchase of a new dwelling or existing dwelling up to the value of $330,000.00 per person. It is important to note that this exemption is only applicable for one transaction per person.
Principal Place of Residence Concession
This concession applies if a property is purchased with the intention of it being the principal place of residence up to the value of $550,000.00. A concession rate to the stamp duty assessment will be applied in this instance. For example, the full stamp duty amount payable on the purchase of a property for $550,000.00 is currently assessed at $28,070.00. If the principle place of residence concession is applied than the amount of stamp duty is reduced to $21,970.00.
Young Farmer’s Exemption/Concession
This exemption or concession is only applicable for young persons, being under the age of 35 years, who are purchasing the first parcel of farmland. The purchase price of the property will depend on whether an exemption or concession is applied to the calculation of stamp duty.
It is important to note that Principle Place of Residence is defined as a person’s primary residence which is intended to be occupied within 12 months from the settlement date of the contract of sale, and for a consecutive period of no less than 12 months.
If you are purchasing a property in the state of Victoria as a foreign purchaser after 1 July 2016 then you will be liable for an increased amount of duty at a rate of 7% for residential properties. A foreign purchaser is defined as a foreign natural person, a foreign corporation or a trustee of a foreign trust.
A foreign natural person is further defined as a person who is not an Australian citizen or permanent resident; or a person who holds a New Zealand citizen with a Special Category Visa (subclass 44).
It is vitally important that you should discuss your eligibility of any of these exemptions or concessions with your solicitor, legal representative or financier to ensure the exemption or concession is applied prior to settlement. This will ensure that you will not have to pay the full duty upfront and then apply for a refund post settlement.
If you require advice or further information in relation to any of the matters discussed in this article, please contact our Conveyancing team on 03 5273 5209.