With all the talk about the Australian housing market over the last few months, much of the discussion has surrounded first home buyers trying to break into the market and whether it’s even possible in this day and age. As it has become one of the most contentious issues of this year’s Federal Election, this article will not explore that question in anything more than superficial detail –because you’ve no doubt heard it all before. But for first home buyers who are in the market or about to jump into it, we can clear up any uncertainty or confusion about some of the terms or concepts you’ll encounter when you meet with a specialist in conveyancing in Melbourne. Let’s start by looking at everything you need to know about stamp duty and land tax.
What is Stamp Duty?
Whenever you buy a house and / or land, anywhere in Australia, you pay a tax called stamp duty which is added on top of the purchase price. The rate is set by the individual states and territories of Australia and is comprised of a number of factors. These factors include:
• A percentage of the purchase price of the property • The property location • Whether it’s a new or established property • Whether it’ll be used as an investment property or as a live-in home
Different states and territories across the country will set different rates for investment properties as opposed to residential homes.
As house prices skyrocket across the country, so too do stamp duty charges – so it’s important to put money aside for this tax when you’re organising how much money you can afford to put down as a deposit. Utilising professional conveyancing in Melbourne can assist you in working out the amount you’re likely to pay.
What is Stamp Duty Used For?
The money from the stamp duty goes into each state or territory government’s revenue accounts and is used for education, health, infrastructure, emergency services and other purposes.
Is Stamp Duty Tax Deductible?
Stamp duty on investment properties is not tax deductible. Nor can you claim stamp duty on residential properties, as you cannot claim anything on the house you live in.
Is Anyone Exempt from Paying Stamp Duty?
Some exemptions or discounts might apply to certain purchasers, for example if they are a first home buyer, but for confirmation it’s best to check each individual state’s current terms and conditions. A specialist in conveyancing in Melbourne may also be able to provide information regarding possible exemptions.
What is Land Tax?
Land tax is a state based levy that is calculated on the site value (not capital value) of the land paid annually to the state or territory’s Revenue department. As it is a state tax, it is calculated at different times of the year. In Victoria, it is calculated for the following financial year annually on 30th June.
The Victorian Government’s State Revenue Office website explains that land owners begin receiving notifications to pay land tax when the acquired value of all the Victorian property they own as of 31 December – minus exempt land such as your home – equals or exceeds the threshold of $250,000 each calendar year (for trustees, it's $25,000).
Like stamp duty, land tax is used for a multitude of improvements to the entire state, both in regional and metropolitan areas.
What Exemptions Exist?
Property owners can apply for numerous exemption options in order to reduce their land tax payments. The main exemption applies when the land is used as the owner’s principal residential property or their primary production land. Other partial exemptions might include if the land is used for religious, hospital or library purposes, land that is owned by, loaned to or used for organisations that help people who assist those that can’t help themselves, land owned by a prescribed body and used for the benefit of the Aboriginal people, and land that is used as a caravan park. There are many more potential grounds for exemption with some state by state variances, so it’s best to check with your local State Revenue Office.
A specialist in property conveyancing in Melbourne will be able to assist you with all of your stamp duty and land tax queries during the purchase process. By finding out as much as you can, you’ll be able to enter the property market armed with the knowledge to help you find your dream home.
|