Stamp Duty - What's It All About?

When you're buying as house, there's one cost that you just can't escape, and one that often feels the worst having to pay – stamp duty.

What is stamp Duty?

Well first off, it's actually called transfer duty in WA. And it is payable on the value of a property when that property “transfers” between owners. It's pretty much a tax.

“Transfers” is important to remember, because the duty is not always payable for a sale.

The Duty payable is determined on a sliding scale based on the value of the home, either the sale value or the determined value by an acceptable formal valuation.

Essentially this means, the more expensive a property, the higher the rate duty that must be paid.

Where does the money go?

Essentially the government, state government that is. How they spend it, well that's a different discussion.

When do you pay it?

The duty is paid by the purchaser, for a sale, or the transferee and must be paid within 30 days of the property settlement – this task is normally performed by a settlement agent or conveyancer acting on behalf of the buyer/transferee.

How much do buyers spend on transfer duty?

Stamp duty is decided by separate state and territory governments. In WA you can find more information on the rates below.

Can I borrow this money with my home loan?

Good question, usually no. The cost of transfer duty would be added to the total amount you would need to make a purchase happen, including your settlement costs and minimum deposit amounts.

We tell our clients what their “total contribution” will need to be: Minimum deposit + transfer duty + settlement costs, to ensure they know how much cash they'll need to make a purchase happen.

Do I need to save this money like a deposit?

Essentially no. Lender's don't require you to save duty like they do for a “minimum” deposit amount.

However, if it is gifted by a friend or family member, or lent or borrowed, it needs to be disclosed at the time of finance application – the lender will want to see you have it and may want to know where you got it from.

Are there any exemptions?

Yes. If you're a first home buyer the state government will give you either a concession or discount on transfer duty.

If you buy an existing established home under $430,000 and all purchasers have not owned property previously (IE: you're all first home buyers) then you'll pay ZERO dollars.

From $430,000 to $530,000 you'll be up for $19.19 for every $100 over $430,000.

If you're building a property, you'll pay nothing if the value of the land only is $300,000. Where the value exceeds $300,000 but not more than $400,000 you'll pay $13.01 for every $100 over $300,000. But you MUST have signed a contract to build a house at the time of settlement of the land.

For all other instanced (non-first home buyers) the government will flog you anywhere between $1.90 per $100 (under $120,000) to $5.15 (over $500,000) under the “residential rate” when buying or building a home.

If you're purchasing land only (no contract to build), you will be charged a higher amount under “General rate” on a sliding scale.

There are also exemptions such as death or a joint property owner or separation of a relationship.

For more info on what you need for transfer / stamp duty for your next purchase, get in contact with us.