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Building a new home can be an expensive process. With home insurance, conveyancing or solicitor fees, and mortgage insurance, costs start to add up quickly. One of the largest payments you’ll make during this process is stamp duty. Although the added cost is substantial, there’s no avoiding it unfortunately, since every real estate purchase accrues a stamp duty cost. But what is it? We’ve got a quick summary of what stamp duty is and why you need to pay it.
Stamp duty is a form of tax written on certain transactions, like real estate, that is imposed by state and territory governments. It is paid by the purchaser of the property. The amount imposed on the transaction will vary from state to state, but each state and territory in Australia imposes stamp duty on real estate purchases.
The amount of stamp duty you’ll pay depends on a number of factors. The location of the land or property being purchased, whether you’re a first home buyer, and whether you’re buying land or a dwelling, and whether you’re purchasing an investment property or plan to live in the property all contribute to the final amount of stamp duty calculated for your purchase. The amount is calculated on either the expected value of the land and buildings or the purchase price of the land and existing dwelling as at the date of the contract of sale, which is the date when the contract of sale is signed and the deposit is paid by the purchaser. Many financial institutions and State Revenue Office websites offer stamp duty calculators so you can estimate how much stamp duty will be applied to your real estate purchase.
There are some instances where stamp duty may be reduced depending on your circumstances. These include purchases by first home buyers, pensioners, low property value, deceased estates, and off the plan purchases. When you’re ready to purchase land or a home, research the stamp duty exemptions in the state your purchasing in order to see if you qualify for a reduced stamp duty rate.
Stamp duty is paid to the State Revenue Office in the state of purchase prior to the lodging of the transfer of land to the land titles office. Usually the purchaser’s lender or legal representative pays stamp duty after settlement, often with funds that the purchaser contributed before settlement occurred.
The most obvious way to reduce the amount of stamp duty you’ll pay is to buy a less expensive property. However, with the cost of real estate fluctuating this isn’t always possible. In most states and territories, stamp duty increases significantly when the purchase price goes over $500,000. You may opt to look for property in a regional area or even in a different state to decrease the amount of stamp duty you’ll pay. If you’ve purchased a house and land package and will be building a new home, the stamp duty is calculated on how much the property is expected to be worth, so reducing the cost of the build by sticking with the standard inclusions offered by your builder will help keep the build costs low and subsequently lower the property’s initial value.
When purchasing a new home, whether it’s land or a dwelling, you’ll be required to pay stamp duty on your purchase. This is something you should budget for when saving a deposit to purchase so there are no nasty surprises. Researching estimated stamp duty costs using online calculators will help you allow for this payment on top of you deposit, ensuring you’re not out of pocket with an expense you weren’t expecting. For more home building tips, visit the Hotondo Homes website today.
Hotondo Homes is not a licensed financial expert and we recommend speaking to a licenced financial professional before making a real estate purchase.
In simple terms, equity is the difference between what your home is worth, and how much you owe on it. For example, if your home is worth $400,000 and you still owe $250,000, your equity is $150,000.
Within five to ten years of owning a home, you will have built a sizable amount of equity. If you are looking at purchasing another property, banks will generally lend you up to 80% of a home’s value without having to use Lenders Mortgage Insurance, and you may be able to access a portion of your equity to use for the remaining deposit.
For a closer look at using equity, check out RateCity’s guide to using home equity to buy an investment property.
House and land packages are a great way to reinvest your equity and make a return by using it as a rental property.
Packages offer convenience and the homes are specifically matched to suit the land. Building a house and land package will also result in paying less stamp duty. This is because you only have to pay stamp duty on the value of the land as the home hasn’t been built yet.
Potential investors should also consider the benefits of higher quality materials and construction techniques that new homes offer, resulting in little to no maintenance costs, energy efficient technologies and warranties on the home, its fittings and appliances.
Check out all the latest house and land packages by Hotondo Homes here.
When looking to use your equity, the bank will take into account your age, income, family, cost of living and any additional debt you may have incurred. It is also wise not to use every last cent of your equity so you can give yourself a safety buffer in case of emergencies. Before you start building your property portfolio, it is best you speak to your banker or broker.
*Hotondo Homes is not an authorised financial adviser so please seek professional advice for your banking enquiries.
Purchasing a new home can an be expensive process. With insurance, conveyancing fees, council rates and borrowing fees, the ‘extra’ costs can really rack up. One of the larger upfront rates you will be required to pay is stamp duty.
Although the added cost can be painful, it is a necessity when buying in Australia. Read our guide below to understanding stamp duty and how it is calculated.
Stamp duty is a tax charged by Australia’s state governments in relation to the transfer of land or property. So whenever your purchase land or property you will pay stamp duty.
Every state calculates stamp duty differently, and various factors can influence the cost of it including location, the value of the home and whether you are a first home buyer.
Stamp duty is calculated differently according to where you plan to buy in Australia. Usually the cheaper the property the lower stamp duty will be.
Most states will use price categories, for example $200,000 – $300,000, and charge you according to where your home fits in the price range.
Generally, if you purchase a block of land and build later, you will only pay stamp duty for the land cost. For a comprehensive guide on how your state or territory calculates stamp duty visit your local state revenue office or follow the links provided below.
You can also use a stamp duty calculator for a rough indication of the cost you are up for by clicking here.
First home buyers are generally eligible for a concession or discount cost on stamp duty in order to help them enter the market.
Again, this varies for each state. Head to your local revenue office via the links below for full criteria, or find your local Hotondo Homes dealer here.