- 27 Jan, 2017

Stamp Duty Costs a Rising Concern

As home prices across Australia rise so too do stamp duty. Subsequently, for many home buyers, especially those buying their first property, this cost is becoming an obstacle to home ownership.

Stamp duty is a government fee charged at the time of buying a home. This fee varies state-to-state and depends on property price and type, and buyer status first home buyer, owner/occupier, or investor. While stamp duty adds thousands to home buying costs, the real concern is how complicated stamp duty costs are to calculate. Consequently, for some potential home buyers, stamp duty turns them off buying altogether.

Why Governments Charge Stamp Duty

For many state governments, stamp duty is one of their largest sources of revenue. Such as, during the 2014-15 financial year, Australian state and local governments raised $89.278 billion in revenue, a 7% increase on 2013-14 figures. Accordingly, revenue consisted of $45.203 billion or 50.6% in stamp duty and rates. Property tax revenue during the 2014-15 financial year was 10.5% higher than the year previously. Thus, state and local governments are raising these revenue sources at high rates.

CoreLogic estimate if home sales figures fall than some state and local governments may face budget deficits. Subsequently, state and local governments may resort to changing stamp duty regulations further to cover the gap.

Rises in Stamp Duty Costs

With stamp duty based on a percentage of purchase price, the cost of stamp duty increases along with home values. As an example, in five years home values in Sydney and Melbourne have risen by 62 and 38% respectively. So, stamp duties have also risen.

Although stamp duty is not the only cost home buyers need to consider. Other costs such as conveyancing and saving a deposit can add great expense to the purchase of a property. Plus, as home prices increase so too does the size of the deposit needed to buy a property.

Median Home Values and Stamp Duty

Median home values across Australia vary. Sydneys median hovers around A$800,000 while Adelaides is half this value at A$415,000. Nonetheless, Victorian and South Australian stamp duty costs are higher than other states.

Based on media values and stamp duty estimates, some Australian capital cities have higher stamp duty rates than other cities. For example, buying an $800,000 home Sydney median incurs stamp duty of $43,070 in Melbourne or $37,830 in Adelaide. But, stamp duty in Sydney for this home is just $31,763.

Estimated Stamp Duty By Capital City

Source: CoreLogic RP Data

First Home Buyer Stamp Duty Discounts

Some states, however, offer first home buyers a concession on stamp duty. Nevertheless, this concession is only applicable on certain home values. For instance, Victorian first home buyer property valued at $600,000 or less attracts a 50% stamp duty discount. Whereas, Queenslands first home buyer cap is $550,000 and attracts a stamp duty discount of $8,000. Also, no first home buyer concession applies in Canberra, Tasmania, South Australia, and New South Wales.

Investor Stamp Duty

Calculating investor stamp duty is extremely difficult. According to CoreLogic, stamp duty is higher for Queensland investors. Comparably, this state has a higher proportion of investors than other Australian states. Still, New South Wales, which has the highest proportion of investors does not charge investors anymore in stamp duty. But, this state does charge a stamp duty premium on foreign investor purchases, as does Victoria and Queensland.


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