What do I need to know about stamp duty before I buy a home in Victoria?

Every time you purchase real estate in Victoria, you must pay land transfer duty.  This duty is far more commonly known as stamp duty and it is paid to the State Revenue Office (ie, the Victorian Government) by the purchaser (it is rarely payable by the vendor).

The amount of stamp duty payable is based on the purchase price (or the market value, if it is higher), and is calculated according to a sliding scale similar to how the income tax tables operate.

A purchase price over $960,000.00 will have duty of 5.5%, but purchase prices under this amount are calculated differently.  Most homes will be in the range of $130,001.00 to $960,000.00 so we will concentrate on this range for the purposes of this blog post.  Full duty on a purchase price in this range is calculated as follows:-

Full duty = $2,870.00 plus 6% of the purchase price above $130,000.00

By way of example, if you are buying a home worth $500,000.00, your duty will be calculated as follows:-

Full duty = $2,870.00 + (0.06 x ($500,000.00 – $130,000.00))

Full duty = $2,870.00 + (0.06 x $370,000.00)

Full duty = $2,870.00 + $22,200.00

Full duty = $25,070.00

We will use this purchase price of $500,000.00 for all duty examples throughout this blog post.

Thankfully there are handy tools online which avoid the need to undertake manual calculations each time.  Follow this link to use this calculator directly from the State Revenue Office to determine how much stamp duty is payable on your intended purchase. https://www.e-business.sro.vic.gov.au/calculators/land-transfer-duty

As this amount is not insignificant, you really must factor possible stamp duty into the funds required to purchase a property before you sign a Contract of Sale of Real Estate.  Stamp duty is payable at settlement (no longer 30 days after settlement).  If you have a bank or other lender involved on your behalf, they will usually provide sufficient funds for stamp duty and deduct that amount from your loan unless you make other arrangements.

You will be pleased to know there are a number of stamp duty exemptions and/or concessions that you may be able to apply to your purchase.  The main few you are likely to consider are as follows:-

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1. Principal Place of Residence (PPR) duty concession

You may be eligible for a partial stamp duty concession if:-

• You are buying a property that you intend to live in as your home;
• You move into that property within 12 months of settlement;
• You stay living in that property for at least 12 months; and
• The purchase price is between $130,000.00 and $550,000.00.

Duty payable on a purchase price of $500,000.00 with a PPR concession is $21,970.00 (a saving of $3,100.00).

This PPR concession can be used multiple times during your lifetime.

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2. First Home Buyer (FHB) duty exemption/concession

You may be eligible for a full exemption on stamp duty if:-

• You are buying a property that you intend to live in as your home;
• You move into that property within 12 months of settlement;
• You stay living in that property for at least 12 months;
• You and/or your partner have not previously owned a home;
• You and/or your partner have not received the FHB exemption/concession beforehand,
• The purchase price is $600,000.00 or less.

Duty payable on a purchase price of $500,000.00 with an FHB exemption is $0.00 (a saving of $25,070.00).

The FHB duty concession applies on a sliding scale for purchase prices between $600,001.00 and $750,000.00.  Use the calculator link above.

This FHB exemption/concession can only be used once.

In summary, on a purchase price of $500,000.00:-

• full duty is $25,070.00;
• duty with a Principal Place of Residence concession is $21,970.00; and
• duty with a First Home Owner exemption is $0.00.

This potential saving is significant and should be properly considered by you and your conveyancer/solicitor both before you sign a Contract of Sale of Real Estate and in the time leading up to settlement.

Be warned that the Duties Act 2000 (Vic) allows the State Revenue Office to require you to repay any duty saving at a later date if it becomes known to them that you are no longer eligible for the exemption/concession.  For example, if you do not move into the property within 12 months from the date of settlement, or you do not stay living in the property for a continuous 12 month period, the State Revenue Office could come knocking to claw back your saving (possibly $25,070.00 in these examples. In fact, you are obliged to self-report to the State Revenue Office that you are no longer eligible).

Keep in mind that you may choose to pay full duty at settlement and then apply for a duty refund by way of a reassessment at a later date once you are confident that you have met all of the eligibility requirements.

Stay tuned for future blog posts in relation to stamp duty implications when buying vacant land, properties off-the-plan, or if you hold a valid pension card, when transferring property from an estate or between other related parties.

These comments are current as at 1 June 2019 and apply to the purchase of property in the state of Victoria only by Australian citizens or permanent residents.  It should be noted that stamp duty is a complex area of law and there may be other exemptions, concessions or additional duties which may apply to your circumstances especially if you are transferring property between related parties rather than in an arm’s-length transaction.

If you would like to discuss the stamp duty implications for your purchase, please call our Drouin or Warragul offices to make an appointment, or book online.  We would be pleased to discuss your specific circumstances with you.

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