August 13, 2021

What You Need to Know About Stamp Duty and Buying a Property

Is Stamp Duty Still Required?

Stamp Duty is one of the highest costs associated with buying a property in Australia. Different states can refer to stamp duty as land transfer tax and in the end stamp duty is nothing more than a tax imposed by State Governments across Australia.

The money raised by Stamp Duty more often than not is included in consolidated revenue and spent by State Governments. In 2020 38% of Victorian Government tax is stamp duty.

Given that stamp duty for a $1 million home is approx. $55,000 this can prove to be quite substantial. In short this means $55,000 of your funds are consumed by the Government.

While in Victoria first home buyers pay no stamp duty for property prices up to $600,000, independent mortgage advisor in Melbourne What If We Finance believes the government budget is getting a free hit from record property prices and is in effect taxing people more and more as property prices rise.

In short the Government is taxing us more and there has to be a better way when it comes to stamp duty.

NSW a new approach

The NSW Government in 2020 is going to offer home buyers a different approach. Rather than slugging home buyers with a large stamp duty bill when buying a property, home buyers can pay smaller amounts of land tax every year. The government still gets income every year and home buyers have a lower upfront costs. Melbourne mortgage broker What If We Finance believes this also allows the government to benefit from increasing property prices.

The details of the NSW scheme are still being finalised but this has laid down the gauntlet for other states. Victoria did trail a 50% reduction on stamp duty for homes under $1 million but this was a limited time offer and subsequently the Victorian Government increased stamp duty rates!

The Industry Says

Industry research is showing stamp duty is a considerable cost to home buyers and record home prices make buying a home even harder.

State Governments may be benefitting from rising home prices at the expense of home buyers. In Victoria even as a first home buyer it is getting harder and harder to buy a home under $600,000 and home prices above $715,000 pay full stamp duty. Even for first home buyers.

The industry through the Real Estate Institute is calling for stamp duty reform.

The proposal is to introduce a two-stream collection model for stamp duty that would provide buyers the option to pay an upfront or ongoing annual fee.

A REI survey from 2020 showed three in five homebuyers would opt for an ongoing annual fee for stamp duty if given the choice.

These results tend to make sense as home ownership becomes more affordable.

As you can see stamp duty is a tax and a considerable cost which needs to be considered when buying a home. The cost of stamp duty varies according to the home price, whether it is an owner occupied or investment property and also your residency status.

The net result of this it is becoming even more important to talk to your mortgage broker What If We Finance and understand the costs involved with buying a home and also your borrowing options and property budget. Contact What If We Finance today to find out more.

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