Anyone who has bought a home has had to factor in the sizeable and unwelcome element of Victorian Stamp Duty. Known also as Land Transfer Duty.
The more expensive the property is, the higher the rate of stamp duty is.
Victorian stamp duty in calculated on a sliding scale, starting at 1.4% for land/properties valued at $25,000 and below and going up to 5.5% for properties over $960,000. For a $1M Melbourne property for example, the stamp duty is $55,000, or 5.5%
What exactly is Victorian Stamp Duty?
Stamp Duty Tax applies to a range of transactions which include:
• Motor vehicle registration or transfer
• Insurance policies
• Hire purchase agreements
• Leases and mortgages
• Hire purchase agreements
• Transfers of property (real estate, shares, businesses)
The Tax is applied by State and Territory governments on purchases and is affected by:
• How much is paid for a property
• The property’s present market value
• The location of the property
• Whether it’s an investment or a home
You can be exempt from Victorian Stamp Duty. Or get a concession where property changes hands after a death or divorce. Or is transferred between family members.
The First Home Buyer Exemption
To assist homeownership the Victorian Government introduced concessions on first home buyer stamp duty.
Full exemptions are given when purchasing a new or established home valued up to $600,000. But on the condition (to exclude investors) the buyers must live in the home for at least 12 months. With homes worth between $600,000 and $750,000 you can get a partial exemption on first home buyer stamp duty.
First Home Owner Grant
The First Home Owner Grant is also of great assistance when a recipient can qualify for this in tandem with the First Home Buyer Victorian stamp duty exemption.
Particularly for younger buyers without extensive savings.
In Victoria, first home buyers can qualify for a grant of up to $20,000 when buying a home in regional Victoria. Or a grant of up to $10,000 for homes in a metropolitan area. The home has to be less than five years old.
Why do we have Stamp Duty?
It’s a consumption tax and governments have come to rely on it. But it can also be a problem for the government.
Victorian Stamp duty is an inefficient and unreliable source of income. Because of the sometimes dramatic cycles of the property market, 2020 with COVID-19 being a good example.
When there’s not a lot of residential transactions, government revenue falls steeply.
Is Victorian stamp duty really necessary?
Any way you look at it Victorian stamp duty is an impost on the process of buying a home.
The justification for this tax seems to be that from the Government’s point of view, wherever considerable sums of money change hands there is an opportunity to take a slice.
This is despite the fact that income tax has already been paid by the homebuyer when they worked for the money in the first place, to buy the home.
So you have to ask, why give homebuyers this double whammy, when they are trying to buy an essential item?
Queensland has already slashed Stamp Duty
Home buyers in Queensland get a much better deal.
Queensland has slashed residential stamp duty, by applying a concessional rate, that attracts home buyers to the state.
The estimated stamp duty on a $1M home in Queensland is $31,850, which is just 3.18% compared with Melbourne’s 5.5%.
Victoria and NSW looking at cutting Stamp Duty
In order to help State economies recover from the economic blow of COVID-19, leaders are considering a removal or reduction of stamp duty on residential property, saving homebuyers tens of thousands of dollars on their next property purchase.
Victorian stamp duty replaced with annual ‘Land’ tax?
Stamp Duty is a barrier to people entering the property market and also changing properties as their circumstances change throughout their lives.
Victoria and new South Wales have been considering replacing Stamp Duty with an annual ’Land Tax’.
This would be something like a council rates bill.
But like a rates bill it could just evolve into another tax on wealth with people in more valuable homes paying the lion’s share.
And people who have retired, with vastly reduced incomes, being unable to meet the annual tax and therefore forced out of the home they worked a lifetime for.
The last thing people want is one bad tax replacing another!
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