Who pays for stamp duty when selling a house?
Stamp duty is often an unavoidable expense in real estate, but do you pay stamp duty when you sell or when you buy? Who do you pay stamp duty to?
Also known as transfer duty, stamp duty is a tax on the transfer of property. It’s charged by your state or territory and how much you pay depends on your circumstances.
Who pays stamp duty?
There’s a misconception that both buyers and sellers pay stamp duty when selling a house – this isn’t true. Only buyers pay stamp duty, usually as an upfront cost calculated as a percentage of the property’s value. Generally, the cheaper the property, the less tax is charged. As a buyer, it’s important to budget for stamp duty on top of other expenses such as your deposit, building inspections and moving costs.
In many cases, stamp duty is included in the price of a home. If it isn’t, you’ll need to work out the cost of stamp duty in your state and add it to the price. Stamp duty isn’t pocket change – stamp duty on a $400,000 home in NSW can cost around $13,500.
Stamp duty doesn’t apply to all buyers in the same way – some buyers may be eligible for stamp duty exemptions or concessions. When stamp duty is paid also differs by state or territory.
While sellers don’t pay stamp duty, there are other government fees when selling a house to be aware of our cost of selling calculator can help estimate how much you should budget to sell.
When to pay stamp duty
In all states, stamp duty must generally be paid within 3 months of signing the contract of sale. However, some states give less time than others or have varying time periods depending on the nature of the purchase.
Paying stamp duty on time is critical to the sale – typically, the transfer of the property isn’t complete until stamp duty is paid. Not paying stamp duty on time may also result in late payment penalties and expensive interest charges.
When to pay stamp duty in NSW can depend on whether you’re a first home buyer or not. Generally, stamp duty must be paid within 3 months of signing a contract of sale. If you’re a first home buyer, you may be eligible for the First Home Buyer Choice scheme. This scheme offers first home buyers the option of paying an annual property tax instead of paying stamp duty up front – this property tax is then paid in one annual or in quarterly instalments. The option to pay property tax applies to homes purchased for up to $1.5 million.
The method of conveyancing can determine when you pay stamp duty in Victoria. Under taxation law, and in the case of traditional paper-based settlements, land transfer duty must be paid within 30 days of settlement – the day you legally take ownership of the home. As property sales are now conducted electronically, stamp duty is usually paid at settlement. Your real estate agent can advise if this applies to you, so you can factor the amount into your budget.
In Queensland, transfer duty must generally be paid within 30 days from when the contract is signed or when it becomes unconditional. Stamp duty becomes payable after your solicitor has lodged all the necessary documents and you are sent a notice of assessment.
In South Australia, you become liable for stamp duty when the sale is finalised, and it must be paid within 3 months.
In Western Australia, stamp duty is paid within a month of receiving a Duties Assessment Notice, but it’s possible under certain circumstances to receive an extension or to pay in instalments.
In Tasmania, stamp duty must be paid within 3 months of the transfer of the property.
In the NT, home buyers must pay stamp duty within 60 days of settlement.
In the ACT, stamp duty is also known as “conveyance duty” and must be paid within 3 months of settlement.
Who do you pay stamp duty to?
Stamp duty is paid to your state or territory government through its revenue office. As a state government tax, your stamp duty is then used to fund essential services like health, education and roads and transport.
Methods of stamp duty payment
Your solicitor or conveyancer can arrange to pay stamp duty on your behalf, but you may also opt to pay it yourself. Stamp duty can be paid by:
- Electronic funds transfer (EFT)
- Cheque or credit card
- Direct debit for eligible customers (in some states)
Who is eligible for stamp duty exemption?
In Australia, there are numerous stamp duty exemptions or concessions available to eligible buyers. Not every state offers the same exemptions but there are typical circumstances where concessions may apply.
First home buyer schemes
Most states have first home buyer schemes offering stamp duty exemptions or concessions to buyers who’ve never owned property before. In most cases, property value thresholds apply.
In some states like Victoria, pensioners may be eligible for stamp duty concessions on certain property purchases. Tasmania’s Pensioners downsizing to a new home duty concession provides a 50% reduction on stamp duty for eligible pensioners who are downsizing to a home valued at $600,000 or less.
Buying off the plan (houses not yet built)
Buying off the plan refers to purchasing a property that is not yet built. If you buy a house or unit off the plan, you may be able to defer payment of stamp duty for a set amount of time. Stamp duty deferments generally only apply to properties that will be your main place of residence.
Some states offer eligible concession card holders concessions on stamp duty. In the ACT, NDIS participants can apply for a stamp duty concession on homes valued $750,000 or less. Many states also offer concessions when property is being transferred between spouses or as part of a deceased estate, although specific eligibility criteria apply. There are also duty concessions available for farms transferred within families or for young farmers buying their first farm, such as in Victoria or South Australia.
As the rules around stamp duty exemptions and concessions vary by state, it’s important to check the eligibility criteria for where you are buying. Talk to an experienced local agent for how these exemptions may apply to you.
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