Written byStamp duty is a tax that state and territory governments charge on certain transactions and documents, most commonly the purchase of property and the transfer of a vehicle.
Also known as: transfer duty, land transfer duty, motor vehicle duty, duty
Key points
- Every state sets its own rates, thresholds, concessions and names: transfer duty in NSW, land transfer duty in Victoria, motor vehicle duty on cars.
- On property it is calculated on the purchase price or market value, whichever is higher, and must be paid by settlement.
- Lenders will not usually lend it: stamp duty comes from your own funds on top of the deposit.
- Vehicle duty is charged when a car is registered or transferred, and it is often rolled into the amount financed on a car loan.
How stamp duty works
Each state revenue office administers its own duty on a list of dutiable transactions: transfers of land and property, including commercial and industrial premises and businesses that include land, motor vehicle registrations and transfers, and some insurance policies. The buyer or transferee pays, not the seller. Duty is charged on a sliding scale, so the percentage rises as the value of the transaction does.
It is due within a set period of signing the contract, and in practice before settlement because the transfer cannot be registered until the duty is paid. Concessions exist for first home buyers and for some off-the-plan and regional purchases, and foreign buyers of residential property pay a surcharge on top. The details differ enough between states that the revenue office calculator is the only reliable guide.
Stamp duty on vehicles
When a car, ute or truck is registered or changes hands, the state charges duty on its dutiable value, usually the price paid or the market value if that is higher. Rates vary by state and some scale up for higher-value or passenger vehicles. On a new car the dealer collects it with the registration; on a private used sale you pay it when you transfer the rego.
Because it is part of the cost of getting the vehicle on the road, duty can usually be included in the amount financed on a car loan or chattel mortgage. For a business vehicle it forms part of the cost base for depreciation rather than being claimed as an expense, and there is no GST on the duty itself.
Stamp duty and finance
On property, duty is the largest upfront cost after the deposit, and it does not count towards the property's value for the lender's loan-to-value ratio. That is why two buyers with the same deposit can afford different homes in different states. Duty on your own home is not tax deductible; on an investment property or business premises it is added to the cost base and reduces capital gains tax when you sell.
For a commercial loan the same logic applies, and the duty on a business purchase that includes land can be significant. Victoria is replacing duty on commercial and industrial property with an annual tax, the ACT has been phasing duty out for years, and other states debate it periodically, so the rules in force when you sign are the ones that count.
Example
A couple in Adelaide have saved a deposit and been pre-approved for a home loan. Before they bid, they run the address through the South Australian revenue office calculator and find the duty, plus registration and legal fees, has to come from their savings on top of the deposit, because the lender will not fund it. They check the first home buyer relief, discover it only applies to new homes and so does nothing for the established house they want, and adjust their price ceiling so that the deposit and the full duty together still fit what they have saved.
Not to be confused with
- Goods and services tax (GST)
- GST is a federal tax on goods and services, while stamp duty is a state tax on particular transactions
- Capital gains tax (CGT)
- capital gains tax is paid by the seller on a gain, while stamp duty is paid by the buyer at purchase
Frequently asked questions
Who pays stamp duty, the buyer or the seller?
The buyer, or more precisely the person the property or vehicle is transferred to. Sellers do not pay duty on the sale, although they may have their own capital gains tax to deal with. On a new car the dealer collects the duty from the buyer and passes it to the state revenue office.
Can stamp duty be added to my home loan?
Usually not. Lenders lend against the property's value, and the duty sits outside that, so it has to come from your own funds along with the deposit and fees. The exception is where you already hold enough equity in another property to borrow against. Vehicle duty is different and is commonly included in a car loan.
Is stamp duty tax deductible?
Not as an immediate deduction, and not at all on the home you live in. On an investment property or business premises the duty is added to the cost base, which reduces the capital gain when you sell. On a business vehicle or equipment it becomes part of the asset's cost for depreciation. Ask your accountant how it applies to your purchase.
When do I have to pay stamp duty?
Each state sets a deadline measured from the contract date, and settlement cannot proceed until the duty is paid, so in practice it is paid at or just before settlement through your conveyancer. On a vehicle it is paid when the car is registered or the registration is transferred into your name.
Do I pay stamp duty on a used car?
In most states, yes. Duty is charged on the transfer of registration whether the vehicle is new or used, based on the price paid or the market value if that is higher. Some states exempt transfers between spouses or on inheritance. The exact rate and any exemptions are on your state revenue office or transport authority site.
Related terms
Purchase price
A purchase price is the agreed consideration a buyer pays a seller for an asset, and it forms the base figure for finance, depreciation and tax.
Read definitionSettlement
Settlement is the final stage of a finance deal, where the lender releases funds, security is registered and you take delivery of the asset.
Read definitionDeposit
A deposit is the upfront amount a buyer or borrower pays towards a purchase, either as part-payment on a sale contract or as cash contributed to asset finance.
Read definitionHome loan
A home loan is a secured loan used to buy property or fund major home projects, with the lender taking a mortgage over the property as security.
Read definitionCar loan
A car loan is a credit contract used to buy a vehicle: the lender provides the funds and you repay them over time with interest.
Read definitionMortgage
A mortgage is the legal charge a lender registers over property to secure a loan, giving it the right to sell the property if you default.
Read definitionGo deeper
Sources
This article is general information only and is not financial advice.