What is the Stamp Duty in Victoria?
Many expenses need to be covered when buying a home. Such are the deposit and mortgage costs. However, there is also a government duty that needs to be covered. This is the “land transfer duty”, more commonly and previously known as the “stamp duty”. What is peculiar is that the stamp duty does not have a common value across the country, but differs from state to state. Each state individually determines what stamp value it will collect, and also what exemptions it will apply.
Here are the five key things to know about the stamp duty in Victoria:
1. The Dutiable Value
Probably the most important thing about the amount of the stamp duty is the financial base for its calculation. This is coined the “dutiable value”.
The stamp duty depends on the dutiable value of the real estate, its future use, whether it is purchased by a foreigner and the eligible exemptions.
The dutiable value, as described by the State Revenue Office of Victoria, is the greater of the price paid for the property or its market value. If the parties participating in the property transaction are unrelated, it is usually considered that the price paid is the market value.
What is important to know here is that the market value should be free of encumbrances. Such could be existing mortgages on the property. This means that if the market price of the property is AUD 900 000 and it carries a mortgage of AUD 300 000, the unencumbered market value will be reduced to AUD 600 000. This will also be the dutiable value for calculating the stamp duty for the transfer of ownership of the property.
2. Stamp Duty Exemptions And Concessions In Victoria
Not all bought properties will carry a stamp duty (exemption) or at least not in the full amount (concession). Prior to buying your property, it is important to study the exemptions to the duty. The State Revenue Office of Victoria has detailed all possible exemptions and concessions of the stamp duty on their online page. Here are the key exemptions:
Stamp duty in Victoria first home buyer exemptions
First home buyers enjoy strong exemptions and compensations from stamp duty. Should the bought property be less than AUD 600 000, first home buyers can enjoy a full stamp duty exemption.
If the dutiable amount is between AUD 600 001 and AUD 750 000, they will be eligible for a stamp duty compensation. The exemption or compensation will also be applied to the purchase of vacant land if you intend to build your first home on it.
Off-the-plan stamp duty concession
If you are buying a property that is located off-the-plan you are entitled to stamp duty compensation or reduction. “Off-the plan” means that no construction has started or finished on the purchased property. In this case, the dutiable amount is decreased with the value of the future construction or refurbishment on the off-the-plan property.
Pensioner stamp duty exemptions and concessions
Pensioners are also eligible for a once-off concession when buying their first property. They are fully exempt from stamp duty if the home they are buying has a dutiable amount up to AUD 330 000. They are eligible for a concession for properties priced from AUD 330 001 to AUD 750 000.
Pensioners may also use the above-mentioned concessions or exemptions, should the property they are buying be their first home. However they will have to choose which concession or exemption to use – they cannot use both.
Young farmer stamp duty exemption or concession
Young farmers are also eligible for stamp duty compensation (reduction). For a single piece of land, purchased after 1 July 2018, young farmers will receive a full exemption from stamp duty for a dutiable price up to AUD 600 000. If the price of the property is between AUD 600 001 up to AUD 750 000, a concession will be applied.
First home buyer with family exemption
Applying for stamp duty exemption, in this case, is possible if you have at least one dependent child under the age of 18. Exemptions are applicable when the dutiable amount is up to AUD 150 000. Compensations are rendered for properties with a dutiable amount up to AUD 200 000. These are available only once-off. This means that if your spouse has utilised this right, now both of you will not be eligible.
3. Temporary Exemptions Or Compensations
Further to the above, sometimes the Government adopts temporary exemptions or compensations in order to stimulate some property transactions. Whenever you are buying your property be sure to learn if such temporary measures are applicable in your area of interest. Here are the temporary exemptions or compensations available recently:
- Full stamp duty exemption for Victorian properties with a dutiable value up to AUD one million bought on or after 25.11.2020 and prior to 01.07.2021.
- A 50% stamp duty compensation is available for properties located in Melbourne and a full 100% exemption is possible should these properties have remained unsold for twelve months or more. The eligible contract dates for either case need to be checked.
4. Stamp Duty Increase
The Government of Victoria applies not only exemptions and concessions to the stamp duty. For foreign persons, who are acquiring property there is an additional duty. Currently the additional duty is calculated as follows:
- Additional duty at the rate of 3% for purchases from July 2015 but before 1 July 2016.
- Additional rate of 7% for purchases for the period from 1 July 2016 but to 1 July 2019.
- Additional rate of 8% for purchases from 1 July 2019, which is currently applicable.
What is important to note here is that the additional duty is calculated on the dutiable amount, prior to any applicable concessions. Then it is added to the calculated stamp duty.
In the event that there are multiple transferees, only some of which are foreign, the additional stamp duty is calculated only on the portion of the property acquired by the foreign person. Then it is added to the total stamp duty owed.
5. The Amount Of Stamp Duty
Having determined your dutiable value, you can calculate the exact amount of stamp duty using the online calculator provided by the State Revenue Office of Victoria. Currently, the stamp duty in Victoria sits at:
$0 – $25,000
> $25,000 – $130,000
> AUD 130 000 – AUD 960 000
> $960,000 – AUD 2 000 000
More than AUD 2 000 000
1.4% of the dutiable value of the property
AUD 350 + 2.4% from the dutiable amount above AUD 25 000
AUD 2 870 + 6% from the dutiable amount above AUD 130 000
5.5% from the dutiable amount
AUD 110 000 + 6.5% from the dutiable amount above AUD 2 000 000
Undoubtedly it is important for each property buyer to familiarise themselves with the stamp duty, its potential increases, exemptions and concessions. The current article will undoubtedly heighten your awareness of the most important aspects of the matter. However, it is always advisable that you should contact a conveyancing property agent. The latter will not only be useful for the exact calculation of the stamp duty but will also facilitate the property transaction and its funding as a whole.