Stamp Duty can be a significant financial liability, additional to the purchase price of the property. So it’s important as the buyer to be aware of what it is, how much it is and when it is payable so that you can factor it in when organising your finance.
What is it?
Stamp Duty – now formally known as ‘Transfer Duty’ – is a duty/tax imposed by the State Government on Transfers of Land. This includes where a property is purchased under a Contract of Sale. Other instances where Stamp Duty will be payable include where property is given a gift, by way of exchange (for example, as part of a ‘house swap’ arrangement), or where the owners otherwise wish to change the names or entity on the title to the property.
Who pays it?
Most Contracts of Sale require that the Buyer/Transferee is the party liable to pay the Stamp Duty. ‘Transferee’ is a legal term which is used to refer to the incoming property owner, and is used in a Stamp Duty context instead of the term Buyer.
How much is it?
Stamp Duty is assessed on a graded scale and depends on the dutiable value of the property. ‘Dutiable value‘ is the higher of either:
- The unencumbered value of the property (generally, this will be the market value determined by a Registered Valuer); or,
- The consideration or amount paid for the property (usually the Purchase Price listed in the Contract of Sale).
Typically, the unencumbered value and consideration will coincide where the property is being purchased on the open market under a Contract of Sale. There will be a difference in these values, however, where the property is being given as a gift, or the consideration is something other than money (for example, the ‘house swap’ situation). In these circumstances, it is necessary to obtain evidence of the unencumbered value of the property.
Stamp Duty can be only be ascertained, therefore, once the Purchase Price (or unencumbered value) is known. It is calculated on a graded scale, relative to the unencumbered value.
There are a number of concessions and exemptions for Stamp Duty. See our ‘Understanding Stamp Duty Concessions’ article for further information.
When do I pay Stamp Duty?
For a typical purchase under a contract, Stamp Duty will fall due 30 days from the unconditional date of the contract (for information on ‘unconditional date’ see our ‘So, when is the property mine? Understanding the key stages of the contract and settlement’ article).
Where there is no contract, Stamp Duty will fall due 30 days after the Transfer Documents have been signed.