A Guide to Calculating Stamp Duty in Victoria

When it comes to buying a home in the soaring housing market in Victoria, it’s a smart move to find out all your costs ahead of time.

Depending on your circumstances, you may find yourself facing one particular payment you hadn’t anticipated. It’s called a “stamp duty,” and it’s a tax paid in all states in Australia for handling certain paperwork, such as those involved in property settlements.

Stamp duty payments vary greatly from state to state and depend on a number of factors, such as the value of the property and whether or not you’re a first-time home buyer. A quick way to get a rough idea of your stamp duty payment in Victoria is to use a stamp duty calculator.

However, several factors that may affect your final calculation are currently in transition in Victoria. In an effort to make housing more affordable to residents of the state, the government has recently announced sweeping changes to stamp duty calculations for certain buyers, such as first-time home buyers and foreign investors.

The sliding scale (before July 1, 2017)

Rather than using a single formula to determine stamp duty in Victoria, the state has a sliding scale, ranging from 1.4% to 5.5%, of the home’s value.

For the purposes of calculation, the state of Victoria considers the value of the property either the property’s market value or the purchase price, whichever is greater. Although it’s not possible in this overview to match every home value with an estimated stamp duty payment, we hope to give you a good sense of the payment landscape.

However, please keep in mind that these estimates are prior to any exemptions or adjustments, and assume that the purchaser is an Australian resident.

In the following list, the first number is the value of the property; the second number is the estimated stamp duty payment, and the final number in parentheses is the percentage of the home value that the stamp duty represents. Percentages are rounded:

$25,000 or less –> $350 or less (1.4%)
$100,000 –> $2,150 (2.15%)
$200,000 –> $6,370 (3.19%)
$300,000 –> $11,370 (3.79%)
$400,000 –> $16,370 (4.09%)
$500,000 –> $21,970 (4.39%)
$600,000 –> $31,070 (5.18%)
$700,000 –> $37,070 (5.30%)
$800,000 –> $43,070 (5.38%)
$900,000 –> $49,070 (5.45%)
$960,000 or more –> $52,800 or more (5.5%)

Sweeping stamp-duty changes on July 1, 2017

In recent years, home prices in Victoria have soared, and concerns over the affordability of housing have been mounting. In an effort to respond to concerns and keep home prices within reach, the state government recently announced sweeping changes to stamp duty calculations for certain types of buyer, such as first-time homebuyers and foreign purchasers.

More generous first-time home buyer exemptions and concessions

In Victoria, whether or not you are a first-time home buyer is probably the single most important factor in determining your stamp duty payment, or whether you even have one. This year, the government in Victoria has made sweeping changes to exemptions, concessions, grants and other measures to help first-time home buyers afford a home.

As of July 1, the government in Victoria has given first-time home buyers a stamp duty exemption on the purchase of properties valued at $600,000 or less, and sliding-scale concessions on the purchase of properties valued between $601,000 and $750,000. However, there is one key requirement to discourage buying property purely as an investment: first-time home buyers must live in the home for at least 12 months.

The change comes in conjunction with a doubling of the First Home Owner Grant (FHOG) for eligible first-time home buyers building new homes in regional Victoria from $10,000 to $20,000.

Increase in foreign investor surcharge

In addition to making changes to first-time home buyer exemptions and concessions, the state government in Victoria has announced a dramatic increase in the stamp duty for foreign investors. Effective July 1, the foreign investor surcharge has more than doubled from three to seven percent. This brings the foreign investor surcharge in Victoria to the second highest in Australia, just shy of New South Wales’ surcharge of eight percent. Although high relative to other states in Australia, foreign investor surcharges in Victoria and NSW are roughly half that of comparable surcharges in Hong Kong, Singapore and parts of Canada.

There are also changes coming for absentee landlords, who will face a surcharge of 1.5 percent starting in 2018, three times the current 0.5 percent surcharge.

Staying on top of stamp duties in Victoria

Because the stamp duty payment in Victoria can potentially push the price of your dream home just out of reach, it’s important to become well-acquainted with this payment, as well any new adjustments you might be able to take advantage of.

Formulas for determining stamp duty in Australia vary from state to state. Victoria uses a sliding scale, starting at 1.4% for properties valued at $25,000 or less, and topping out at 5.5% for properties valued at $960,000 or more. Most homes will come with stamp duty payments in the roughly three to five-and-a-half percent range.

Feel free to try a stamp duty calculator to get an initial estimate of your stamp duty payment. Take note, however, that the state of Victoria has made sweeping changes to several factors that may affect your final stamp duty calculation. Effective July 1, 2017, first-time home buyers purchasing homes with a value of $750,000 or less will receive either an exception on the stamp duty payment or a sliding-scale concession. Foreign investors, on the other hand, will pay an increased, seven percent stamp duty surcharge. To find out how much you will pay, or whether you qualify for a stamp duty exemption or concession, reach out to a trusted conveyancer as soon as possible.

This article was previously published on Titlexchange.

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Gerard Healy - Titlexchange

Gerard Healy is the Co-Founder & Managing Director of Titlexchange, a marketplace that matches those needing conveyancing services with a local conveyancer. Gerard was formerly the CEO of Builders Academy Australia (a wholly owned subsidiary of Simonds Group (ASX:SIO)), and drove that businesses commercialisation into a successful business before Simonds Group listed on the ASX. Gerard left Simonds Group to focus on the technological changes in the broader legal sector and established Law&Co with Simonds Consolidated and Remy Partners. Titlexchange soon followed.

Prior to these roles Gerard worked in other education-related businesses after practicing as a mergers and acquisitions lawyer at Mallesons Stephen Jaques (now King & Wood Mallesons) and a commercial lawyer at Maddocks.

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