When buying a residential property, including vacant land, in Australia, it is likely you will have to pay stamp duty, also known as transfer duty or land duty. This is a government tax applied on the transfer of title of land and property, and is paid by all types of buyers such as owner-occupiers, investors, and commercial or industrial buyers.
Stamp duty NSW (transfer duty) can be a surprise expense for many home buyers as it is an upfront cost that must be paid out of pocket, and the amount can be difficult to estimate due to variations in property prices and state/territory laws.
Stamp duty calculator NSW
To calculate stamp duty in NSW (otherwise known as transfer duty), you can use an online stamp duty calculator, which can be found on the websites of various state and territory revenue offices (see the ATO's stamp duty calculator here). These calculators typically require you to enter information such as the purchase price of the property, the location of the property, and whether you are a first-time home buyer or eligible for any other concessions.
It's important to note the calculation of stamp duty can be a complex process and it's always better to seek professional advice from a legal advisor before making any final decisions.
NSW stamp duty
The stamp duty rates and thresholds for property transfer in New South Wales (NSW) are reviewed annually by the NSW Government to align with changes in Australia's Consumer Price Index (CPI). For properties valued under $3 million, the standard transfer stamp duty applies, while higher rates apply for properties valued above that amount.
To get an estimate of what stamp duty may have been paid in a prior year, you can use the NSW stamp duty calculator provided in a home loan comparison tool.
As of July 2022, the current standard and premium stamp duty rates in NSW are as follows:
The NSW Government's NSW Stamp Duty calculator can be found here.
Stamp duty reform
Changes to First Home Buyer Choice (FHBC) post-2023 NSW state election
There has been much policy change surrounding NSW stamp duty in recent years due to the rapid increases in residential property prices and the relative unaffordability of first home buyers who are trying to enter the market.
The First Home Buyer Choice (FHBC) scheme, which was launched by the coalition-led NSW Government on 16 January 2023, allowed first time buyers to choose to pay an annual property tax based on land value instead of the usual much larger up front stamp duty sum when purchasing a house under $1.5 million.
The new Labor NSW government will close off access to the former NSW government’s First Home Buyer Choice (FHBC) scheme on Saturday 1 July 2023.
Do first home buyers pay stamp duty?
While it is true the new Labor government is removing stamp duty for purchases up to $800,000, the reform proposed will not abolish stamp duty as such. What the new Labor government is abolishing is Perrottet's First Home Buyer Choice scheme, which allowed first home buyers to opt to pay an annual land tax instead of the traditional stamp duty sum. The intended effect of this scheme was to allow first home buyers to put the money they would have had to spend on up front stamp duty costs towards their deposit instead, allowing them to access property prices that would have been unaffordable otherwise.
NSW Premier Chris Minns has stated that first home buyers who have already opted for the FHBC scheme will be grandfathered and thus not affected by the end to the scheme on 1 July 2023.
In New South Wales, you must pay stamp duty within a three-month period after signing a contract for the sale of a property, and the sum is due on the property settlement day. The only exception is for off-the-plan purchases intended to be used as the main residence, in which case the payment can be deferred for up to 12 months or until the property is completed or handed over. The money collected through stamp duty is invested into the economy by the NSW State Government.
Am I eligible for stamp duty concessions?
Although most property buyers must pay stamp duty, there is some good news for first-time home buyers in New South Wales; you may be eligible for a stamp duty exemption or a stamp duty concession through the First Home Buyer Assistance Scheme (FHBAS).
First Home Buyer Assistance Scheme (FHBAS)
The FHBAS applies to the purchase of existing homes, new homes, and vacant land on which a home will be built. Be sure to research the potential stamp duty costs before making a significant financial commitment by visiting the NSW Government State Revenue Office website for more information, where you can find out more about stamp duty exemptions.
If you buy an existing home valued at less than $650,000, you can apply for a full exemption and pay no transfer duty. If you buy an existing home valued between $650,000 and $800,000, you can apply for a concessional transfer duty rate. The amount will be based on the value of your home. Make sure you apply in time as you must pay stamp duty on the settlement date which is usually when you pay transfer duty.
There are certain conditions that must be met in order to qualify for stamp duty concessions and exemptions. For example, if you are buying property with a partner who has already received first home buyer benefits, you will not be eligible. Additionally, you must be an individual over 18 years of age, have permanent residency in Australia, and plan to occupy the property as a primary residence within 12 months of purchase for at least 6 months. Exemptions may also apply in the case of property transfer due to the death of the owner, relationship breakdown, or transfer between married or de facto couples.
Off the plan purchase
Home buyers purchasing an off-the-plan property to live in, that is, not an investment property in NSW, have the option to defer paying their stamp duty up to 12 months after they've signed the agreement, or until the property is completed or handed over, whichever comes first.
Definition of a new home
A new home is a home that has not been previously occupied or sold as a place of residence and includes a substantially renovated home and a home built to replace demolished premises.
What types of property does stamp duty apply to in NSW?
In New South Wales, stamp duty is a tax that is paid when purchasing various types of properties such as residential, holiday homes, land, commercial and industrial properties. However, exemptions or reductions in stamp duty may be available based on factors such as the price of the property, special circumstances such as inheritance or title transfers between de facto couples, and for first-time home buyers.
How to pay stamp duty in NSW
Stamp duty, a tax on property transfer, must be paid within three months after the sale of a property is completed. You typically pay stamp duty with the help of a solicitor or conveyancer during the settlement process. The conveyancer of solicitor who will apply for the assessment of duties and arrange for payment on your behalf. They will also inform you of any concessions or exemptions you may be eligible for. While it's recommended to use a professional to ensure compliance and reduce risks, it is possible to handle the conveyancing process yourself and submit a duties assessment application. Payment options include BPAY, electronic funds transfer (EFT) or by mail, once the total taxes and duties have been determined.
How much is stamp duty on land in NSW?
The amount of stamp duty you will pay is primarily determined by the value of the property. The higher the price of the property, the higher the stamp duty rate will be. In New South Wales, stamp duty is also required for the purchase of vacant land, similar to purchasing a property with a dwelling.
However, if you are buying land that is larger than 2 hectares and worth over $3 million, the premium transfer rate will only apply to the first 2 hectares of land, and any additional land will be charged at the standard duty rate for property worth over $1 million.
Can you borrow to pay for stamp duty in NSW?
Lenders generally prefer when borrowers pay the stamp duty, which is a one-time upfront cost, through personal savings or other means, rather than including it in the loan.
Although stamp duty cannot be included in the loan balance, it can be taken out of the deposit. This may lead to additional costs for Lenders Mortgage Insurance (LMI). Another option for paying stamp duty is through a Guarantor Loan, if you are eligible for one.
Foreign buyers need to consider
In New South Wales, besides the standard transfer (stamp) duty, foreign buyers are also subjected to an extra 8% surcharge on the value of the residential or vacant land they purchase. This foreign buyers duty applies to most property buyers, including those buying an investment property or established home.
When purchasing property in New South Wales, a 2% land tax surcharge is further imposed, affecting the total upfront cost. Property buyers can use the NSW stamp duty calculator to calculate stamp duty and understand the applicable stamp duty rates for their property type, ensuring the correct payment amount.
Exceptions to these surcharges are available, providing stamp duty exemptions and potential reductions in stamp duty costs. If you are on a subclass 444 visa or a permanent resident who has resided in Australia for more than 200 days in the year preceding the purchase date, you may be eligible for these stamp duty concessions. The stamp duty exemption can also apply to specific countries, contributing to a more streamlined property settlement process.
For additional details, please refer to the official website of the NSW Government.
If you are considering purchasing property, it is important you have your accounts up to date and your most recent tax returns lodged. You may also require an accountant's letter, which we can assist with. We have much experience assisting our clients with purchasing residential properties and commercial properties and have assisted all kinds of people from first home buyers to foreign buyers to deceased estate transfers and everything in between.
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Any advice contained in this document is general advice only and does not take into consideration the reader’s personal circumstances. Any reference to the reader’s actual circumstances is coincidental. To avoid making a decision not appropriate to you, the content should not be relied upon or act as a substitute for receiving financial advice suitable to your circumstances.