Stamp duty: what and why?
Stamp Duty has come a long way from its 17th century Italian origins as a fee for processing a land sale and registering it with an actual stamp. Everything was done by hand and recorded on paper. Times have changed…
And yet Victorians still pay a hefty stamp duty whenever they purchase property. So why does this archaic charge remain when we no longer light our houses with kerosene lamps (look it up kids!)? Is it just a government cash grab, or is there something else going on?
After your deposit, stamp duty is usually the next-biggest amount you need to fork out to buy property. So what is it, and can you reduce the amount you need to pay?
Why is there Stamp Duty?
Governments need money to run things. The federal government collects taxes and gives some of the revenue to Victoria. The state government also collects money, and stamp duty is one of the big ones.
State and territory governments love stamp duty. It’s a simple and accepted revenue stream that contributes to the amount they can spend on services, such as roads, public transport, hospitals, schools and a whole lot more. Plus, it’s a ‘progressive’ fee: people buying more expensive properties pay more stamp duty.
Governments need money, and – like it or not – stamp duty is a big revenue earner. Still, it’s a massive hit to budgets, especially for first home buyers.
How much is it?
Stamp duty is paid upfront when a property’s ownership officially passes from the vendor to the buyer. If you’re planning to buy a property, you’ll need more than the deposit. Stamp Duty needs to be taken into consideration too.
Victorian stamp duty (also known as land transfer duty) is levied on a sliding scale based on property value. There are also concessions and reductions available, especially for first home buyers, pensioners and people buying property “off the plan”.
What’s the bottom line?
A first homebuyer in Victoria purchasing an existing $800,000 house to live in will need to save $43,070 for stamp duty. That’s on top of the $160,000 for a 20% deposit. So, more than $200k. Wow.
The ACT and NSW have abolished stamp duty. Queensland has a much lower rate. Should you move north?
In the long run, properties sell for what people can afford. If you have $80,000 saved, you can’t just buy an $800,000 property. But neither can anyone else. Stamp duty is factored into the cost of properties. If stamp duty disappeared tomorrow, it’s likely that house prices would increase by about the same amount.
Don’t pay too much
Get an advantage. Our expert home loan brokers can work with you to maximise your purchasing power. Imagine adding your stamp duty to your loan, so you don’t need it up-front. Imagine finding a rate better than the lenders advertise. Imagine finding a lender who will take a 15% deposit, or even less. Depending on your situation, it might be possible. We’ll help you explore all of your options.
Mortgage Broker Melbourne brokers know how stamp duty works, and can advise you – up-front and in writing – on ways to minimise its impact on your borrowing potential. Let us do the heavy lifting: we’ll work out duties, levies, repayments, fees and everything else to do with buying property.
We can then help you find a loan that suits you, and even help out with the paperwork and approval process.
Contact us at Mortgage Broker Melbourne for help shaking off the stamp duty blues.
Marc has been a professional lender for 28 years. After beginning his career in 1990 with a UK Building Society, he moved to Australia where he held several different retail banking roles. In 1999 it became clear to him that a mortgage broker would eventually become an obvious choice for someone looking for a home loan so he took the plunge and became an independent broker. He hasn’t looked back since!