Government fees when selling a house
When selling a house, who pays for what – the buyer or the seller?
While buyers may be slugged with Stamp Duty, sellers may also need to factor certain government fees into their budget.
It should be noted that while these fees generally apply nationwide, they vary in amount from state to state and person to person and may not apply in every situation.
Discharge of mortgage fees
‘Mortgage discharge’ is the process of ending your mortgage with your lender and removing it from your property title. To close the loan, most lenders charge a mortgage discharge fee that you will have to pay as well as other potential government, legal and administrative costs.
Discharging your mortgage is an important part of the settlement process. If you took out a loan to buy your house, your lender holds the Certificate of Title as security until the loan is paid out in full. When it comes time to sell, your lender has to be removed from the property title so ownership can be transferred to the buyer. Your solicitor or conveyancer will notify your lender during the settlement period of your intention to pay out your loan, who’ll process your request and register the discharge of your mortgage with your state’s Land Titles Office.
Lenders can charge anywhere between $200 and $600 to discharge a mortgage, depending on the value and age of the loan. This may or may not include the government mortgage discharge registration fee which varies by state – it currently ranges between $120 and $200. Some states such as Queensland also charge additional fees if you terminate a loan. In the Sunshine State, discharging your mortgage incurs a release fee of $175 or $350, depending on whether one or two people are paying it out.
On top of discharge of mortgage fees, you may have to pay your lender extra fees to end your home loan, such as any interest or penalty interest that is due. If you are discharging a mortgage with a fixed interest rate, you may also be liable for a break cost, depending on your contract. Any legal fees incurred by your lender may also be passed on to you.
As how much you’ll pay in mortgage discharge fees depends on your situation, it’s advisable to speak to your lender for a breakdown of all possible amounts.
Capital Gains Tax
Capital Gains Tax (CGT) only applies to investment properties, not the home you live in, so you generally won’t have to pay it if you are selling your main residence. If you are selling any kind of property that isn’t your main residence – like a rental house or plot of land – you are likely to be liable for CGT.
CGT is a tax on the profit from the sale of an asset. This profit, or capital gain, is reported in your income tax return for the year and paid as part of your income tax, taxed at the same rate. You can work out your taxable amount by taking your selling price and subtracting what you paid for the property, minus any incurred expenses like renovations or maintenance. The balance is your capital gain or loss.
How much Capital Gains Tax you pay depends on how long you’ve owned the property and whether you’ve made a net capital loss for the year.
If property was held for less than 12 months
The date you exchange contracts with the buyer of your property is called the “CGT event” – when you make the capital gain or loss. If you owned the property less than 12 months before the CGT event (excluding the date of acquisition and the CGT event itself), you are likely to be taxed on the full amount of your capital gain.
If property was held for more than 12 months
If you owned the property for at least 12 months before the CGT event, you may be entitled to a 50 per cent discount. This means you are taxed on half the amount of your capital gain.
Selling a property for less than you paid for it is a capital loss. If you have made a capital loss on an investment property, you can carry it forward to future periods and deduct it from any gains you may make. This means less tax to pay on your capital gains.
Title Search cost
Your solicitor or conveyancer will conduct a Title Search on your property as part of the selling process. This mandatory search shows the current owners plus any mortgages, covenants, easements or caveats on the property. How much a Title Search costs varies by state, the information broker used and complexity of the search. Depending on where you live, Title Searches can cost over $200 – your solicitor or conveyancer can tell you how much you’re likely to pay.
When you sell your house, any fees still outstanding at the time of settlement need to be paid – these can include council and water rates, or property management fees if selling a rental property. You may also have to pay outstanding land tax or strata fees.
Land tax is an annual levy on land you own above a certain threshold. Every state and territory except the NT charges land tax and how much you pay depends on your state. It usually only applies to investment properties – main residences are generally exempt. When you sell, you will need to pay the portion of land tax owing up to and including settlement day.
Strata fees are charged on properties owned as part of a strata scheme such as apartments, townhouses or villas. If you are selling a strata property, any outstanding periodic strata levies are usually paid from the proceeds at settlement.
Stamp duty when selling a house
Sellers do not pay for stamp duty, only buyers. As stamp duty is calculated on the sale price, it can be a factor in how much buyers eligible for stamp duty are willing to pay for your property. While it varies by state, the upfront cost of stamp duty can be significant – for example, stamp duty on a $400,000 home in NSW may be around $13,500, and $16,200 in South Australia.
For more costs of selling a house, our cost of selling calculator can help. A good agent can advise on any questions you may have for reducing some of these expenses.
What are some government fees when selling a house?
How much Capital Gains Tax will I pay when selling a house?
Who pays for stamp duty when selling a house?
What is a discharge of mortgage fee?