Your Ultimate Guide to Stamp Duty in Victoria Explained
15 min read
Your Ultimate Guide to Stamp Duty in Victoria. Aside from saving your home loan deposit, the biggest expense you will be faced with when buying property in Victoria is probably going to be stamp duty. That said, for certain people there are stamp duty concessions available.
What is stamp duty?
Stamp duty, also known as land transfer duty, is the tax you are required to pay to the Victorian State Government when you buy property in Victoria. Property can mean land such as residential, rural, agricultural or commercial and dwellings including houses, apartments, townhouses, units, duplexes and buildings. When buying, you will be required to pay stamp duty on land in Victoria.
How much is stamp duty?
Stamp duty differs for every property and for every buyer based primarily on the contract date and the value of the land/property. For most people, stamp duty is going to run into the tens of thousands of dollars unless an exemption applies. Victoria is one of the most expensive states to buy property in because of the stamp duty payable. Stamp duty is based on a sliding scale according to the value of the property.
As at July 1, 2021 the below rates apply according to the SRO website.
|$0-$25K||1.4% of the dutiable value|
|>$25K-$130K||$350 + 2.4% of the dutiable value|
|>$130K-$960K||$2870 + 6.0% of the dutiable value|
|>$960-$2M||5.5% of the dutiable value|
|>$2M||$110K plus 6.5% of the dutiable value over $2M|
For contracts entered into before July 1, 2021 historical rates apply.
How to calculate stamp duty in Victoria
As mentioned above, stamp duty is calculated based on the value of the land/property you are purchasing.
There are however a lot of variables which can come into play when calculating stamp duty such as:
- The date of the contract for your property purchase
- The dutiable value of the property (generally the greater of the purchase price or market value at the time of contract)
- If this is your first property purchase in Australia
- The zoning of the property such as if it is residential or not
- If the property is to be used for certain commercial, industry or extractive purposes
- Whether you are a foreign purchaser
- If you are purchasing off-the-plan property
- Whether the property is an investment property or principle place of residence
Use the stamp duty calculator
Who pays stamp duty in Victoria?
Stamp duty is paid for by the purchaser. If you are selling and planning on buying again you’ll likely need to pay stamp duty on your next purchase. We would recommend ensuring you include this cost in your budget as you begin to work out what you are going to do next.
Who do I pay stamp duty to?
In Victoria, stamp duty is charged by the State Revenue Office (SRO) and this is who needs to be paid when the property settles. Your conveyancer will organise for these funds to be transferred on your behalf at settlement.
When does stamp duty have to be paid?
In most cases, payment is due within 30 days of settlement. With electronic settlements now in place across Victoria, stamp duty is paid the same day the property settles. Settlement is the day legal ownership of the property is transferred to you. It is also when all monies are exchanged from purchaser to vendor, if there are loans in place this is the day they are drawn down and it’s when fees and stamp duty must also be paid.
It’s important to ensure you have sufficient funds in your account on settlement day to cover any shortfall.
Shortfall is the difference between the total monies you need to pay for the property transaction and the what the bank is going to be paying via the home loan. If you have already paid a deposit, then this will also be taken into account.
Shortfall can range from a few hundred through to hundreds of thousands depending on things like stamp duty payable, fees and other charges. Your conveyancer or solicitor will calculate what your shortfall will be and notify you in advance so you can ensure you have sufficient funds ready on settlement day.
What exemptions are there in Victoria?
The good news is that there are several exemptions in Victoria you may be eligible for, which may mean you don’t have to pay stamp duty at all!
First Home Buyer exemption and concession
If you bought your first home and signed the contract on or after the 1 July, 2017 then an exemption may apply.
First home buyers may receive the first home buyer duty exemption,if:
- The property is valued at $600K or less,
- You will be living in the property for 12 months, beginning within 12 months of settlement.
This means no stamp duty is payable at all.
First home buyers may receive the first home buyer duty concession if:
- The property is valued at $600,001 to $750K,
- You will be living in the property for 12 months, beginning within 12 months of settlement.
A concession is available on a sliding scale for first home buyers who meet this criteria. To qualify a purchaser must never have claimed an exemption or concession under this scheme, you can only receive it once.
Principle Place of Residence (PPR) concession
If you are buying property and intend to live in it for a minimum of 12 months, within 12 months of settling you may be eligible for an exemption.
- The property can be valued up to $550K,
- Is does not have to be your first home.
If you bought a home before any building works have started, you have likely purchased “off-the-plan”. If you have bought off-the-plan then you might be eligible for a stamp duty concession.
Factors that affect your ability to access this concession include:
- When you signed the contract,
- Who is going to own the property,
- You must also be eligible for the PPR concession or the first home buyer exemption/concession.
Pensioner exemption or concession
Pensioners buying property to live in may qualify for a one-off stamp duty exemption if:
- The property is valued at $750K or less
- It is to live in as your principle place of residence (PPR)
- Hold a relevant pension or concession card at settlement
- Have never received the concession before
- Buy the property at market value
From time to time the SRO will announce temporary exemptions which are available to certain eligible purchasers.
One such is for residents buying in the City of Melbourne from 1 July 2021 to 30 June 2022.
- A 50% exemption applies to new residential properties
- A full exemption applies for new residential properties which have remained unsold for 12 months or more since construction was completed
These are only for new properties, not established properties, and is available to both owner occupiers and investors.
Can I receive both the stamp duty exemption and First Home Owners Grant?
Yes, if you are eligible to receive both of these support packages then you are able to receive both on the same transaction. Your conveyancer/solicitor can guide you through the process of understanding your eligibility and completing any appropriate forms.
Applying for an exemption
Any stamp duty exemption you wish to apply for must be done using the State Revenue Office issued forms.
This may be done using their online portal and completing a digital form or your legal representative may be able to do this on your behalf. Ensure you check with your legal representative before lodging any forms to ensure you are not duplicating efforts or completing incorrect paperwork.
Do foreign purchasers have to pay stamp duty?
Yes. And unfortunately, in Victoria, foreign purchasers are required to pay an additional duty.
There are some exceptions to this. For example, the SRO website notes if a foreign natural person receives property through an inheritance via a will, then no stamp duty or additional duty is payable.
There are so many different variables when it comes to foreign purchasers it’s critical to get advice from your legal professional prior to signing a contract.
Is stamp duty payable if I am transferring a property to my spouse or de facto?
If you are legally married or living in a genuine domestic relationship, then you don’t have to pay stamp duty on a property that is held as your principal place of residence. If the property is held as an investment, stamp duty will be payable on the portion of the property being transferred.
A transfer of property to any other relative including children and siblings would attract stamp duty even if the property is being gifted. In this circumstance the duty would be based on the market value of the property.
How about if I am gifted the land/property?
Yes. Stamp duty will be charged when you buy land or property but you may also have to pay stamp duty if you acquire property in another way. For example if you receive it via a trust or gift, a beneficial transfer of property or any other situation that arises resulting in you acquiring land.
What if I inherit the land/property?
Generally, no. If property is given to beneficiaries according to the will then there is no capital gains tax or stamp duty payable. It is worth checking this with an accountant and legal professional prior to receiving any property as individual circumstances may vary.
Can I pay an annual land tax instead of a lump sum upfront?
No. In Victoria stamp duty is paid once only when the property changes hands. The new owner needs to pay this within 30 days of settlement. Some states are looking at making changes and bringing in an annual tax to spread the cost out, however at this point in time no such plans are in place in Victoria.
Where do Entourage come in?
An important element of buying property is to ensure your finances are in order. Entourage can provide guidance and support when it comes to making this happen. From organising borrowing power, discussing loan options and features through to understanding repayments and getting your pre-approval in place – working with an Entourage will provide you with peace of mind so you know where you stand. We also save you time and money by doing the heavy lifting with the banks and guiding you to the right finance solution to suit your needs.
Helping you understand what costs you might be looking at when it comes to stamp duty and others fees, the Entourage team go to work to ensure you are ready to purchase and support you all the way through to settlement day (and beyond in many cases!).