With recent reforms to stamp duty about to be finalised in New South Wales, many homeowners are wondering if the other states and territories will follow suit.
Like it or not, there are many hidden costs associated with purchasing a home, and one of the most notorious is stamp duty. While there are a handful of concessions and waivers available that depend on your state or territory, more often than not it’s a tax that’s difficult to avoid.
However, New South Wales Premier Dominic Perrottet announced in June that his long touted reforms to stamp duty will include offering some first home buyers the choice of making the up-front payment, or opting into an annual property tax. With his argument being that stamp duty was a barrier for first home buyers, the reforms will allow buyers to opt out of paying stamp duty, and instead pay $400 plus 0.3% of the land value per year.
Although feedback has been mixed from economists, many have been left wondering if the other states and territories are set to follow the landmark reforms seen in New South Wales, and if any changes are necessary in the first place.
An Introduction To Stamp Duty In Victoria
Given our similar economic landscapes, it should come as no surprise that the Victoria and New South Wales state leaders are known to collaborate on a wide range of issues on a regular basis. Although around 200,000 properties change hands every year in Victoria, our stamp duty format has thus far remained unchanged.
If you’re unfamiliar with the concept, stamp duty is a government tax on certain transactions, and Australians generally need to pay it when they buy a motor vehicle, insurance policy or real estate. While stamp duty on a property can also be known as land transfer duty, the amount that applies to a transaction varies depending on where you live, the type of transaction taking place, and the property’s value.
Stamp duty has been criticised by many economists as a grossly inefficient tax. Despite its long standing position in the tax system, it has also been blamed for exacerbating the housing affordability crisis, discouraging people from moving or downsizing and adding a layer of unpredictability to state budgets.
In Victoria, stamp duty or land transfer duty is calculated on the purchase price or the property’s value on the open market – whichever is greater. The figure is calculated on a sliding scale, and starts at 1.4% if the property is valued at $25,000 before rising to 5.5% if the property is valued at or above $960,000.
While Victorian Premier Dan Andrews recently acknowledged the reforms announced in New South Wales, he refused to comment on whether Victoria will introduce similar changes. However, as Victorians pay the highest stamp duty in the nation, it’s worth taking note of the current exceptions available.
One of the newer stamp duty initiatives is available when you buy a new residential property within the City of Melbourne local government area with a dutiable value of $1 million or less. Although different contract dates apply to the concession and the exemption, buyers may be entitled to a stamp duty exemption or concession where you pay only 50% of the duty otherwise payable.
In addition, other key exemptions and concessions to land transfer duty or stamp duty include the following –
- Deceased estates, which includes an exemption on a transfer of land by the executor of a deceased person to a beneficiary.
- Transfer between spouse or partner, which includes an exemption for transfers between partners and spouses, including transfers arising out of a breakdown of a relationship.
- Regional commercial and industrial properties, which includes a concession if you buy property in regional Victoria for commercial, industrial or extractive industry.
- An exemption for the transfer of a family farm, depending on the class of the land, the nature of the transfer, and the status of the parties involved in the transfer.
- Young farmers, which is a one-off duty exemption/concession for young farmers buying their first farmland property.
- A concession where corporate groups form a single entity for tax purposes by interposing a company between the existing head trust or company and its unitholders.
- A concession where a corporate group reorganises its business structure, such as transferring assets between corporations that are members of the corporate group.
- Charities and friendly societies, which may be eligible for certain exemptions from land transfer duty.
- A number of exemptions and concessions specifically for first-home owners and pensioners, with more than one commonly available.
If you’re thinking about purchasing property but aren’t entirely sure on how stamp duty works, keep in mind that there’s always a unique industry professional who’s ready to help. While a mortgage broker acts as the ‘middleman’ between a lender and a borrower, they’re also an incredibly knowledgeable resource to help you navigate the world of home loans.
Your Guide For Navigating The World Of Home Loans
With a background in banking, finance, business development and project management, there’s no better advocate to have on your team than Nikki Berzin. As a fully qualified mortgage broker and director of Cherry Lending & Finance, Nikki is passionate about all things finance, and empowering her clients with the tools to hit their property goals is what she does best.
If you’re looking to get into your first home, purchase an investment property or even want to look at your options for refinancing, the first step is starting the conversation. Get in touch with Nikki today, or call her directly on 0427 374 155 to bring your mortgage dreams to life.
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