Stamp duty isn’t the most exciting part of building a home, but it’s something you’ll hear about a lot when looking at new houses and buildings. Though you’re seeing these words everywhere, you might be wondering, what is stamp duty? What has stamp duty and what doesn’t? Most importantly, how much will it leave you out of pocket? Today, we’re putting our stamp on stamp duty, explaining the basics so it makes sense! Our goal is to give you an idea of what it is, how it works, and ways you can cut down on how much you have to pay.
Before we dive in, we should point out that stamp duty varies from state to state. This article will be looking at the rules in Queensland, so our interstate readers should check their local guidelines for further information.
Top 6 Points made in this article
- Stamp duty is a once-off tax that applies to numerous types of transactions, including house and land purchases
- The amount of stamp duty you have to pay is based on the purchase price of your home.
- Though you have to pay stamp duty on land and pre-existing homes, it doesn’t apply to building a new house.
- House and land packages only need stamp duty paid on the land part of the deal
- Building a new house could save you thousands, even tens of thousands, of dollars in stamp duty.
- Some incentives and grants can help you out.
What is stamp duty?
Stamp duty, also referred to as Transfer Duty, is a once-off sales tax that a state or territory government will charge for certain transactions, including buying an established home and property purchase. This is charged on purchased land and pre-existing houses, but not on constructing a new place. Stamp duty is paid by the person purchasing the land, not the seller.
It’s important to point out that stamp duty goes directly to the QLD Government, not your builder, land seller or any contractors. In other words, they don’t have any say in it and don’t get anything out of stamp duty.
What timeframe do I have to pay stamp duty?
In Queensland, you have to pay within 30 days of entering into the contract or when the contract becomes unconditional. A contract becomes unconditional once all conditions are met and, assuming there are no pre-conditions, both seller and buyer are legally obliged to follow with the sale. Unfortunately, you can’t pay stamp duty in instalments as you can with mortgage and home loan payments.
A month isn’t a huge amount of time, so you need to account for stamp duty in your budget from the get-go. It could save you from a nasty surprise down the track. If you don’t pay stamp duty on time, additional fees may be added.
How much does stamp duty cost?
We won’t beat around the bush: stamp duty can be an expensive addition to an already costly endeavour. The stamp duty payable will be calculated based on the purchase price of your land and/or existing house. In other words, the more expensive your land and pre-existing house, the more stamp duty you’ll need to pay.
|Property Value||Stamp Duty Tax|
|No more than $5,000||None|
|More than $5,000-$75,000||$1.50 for each $100 over $5,000|
|$75,000-$540,000||$1,050 plus $3.50 for each or part of $100, over $75,000|
|$540,000-$1Million||$17,325 plus $4.50 for each $100 or part over $100, over $540,000|
|More than $1Million||$38,025 plus $5.75 for each $100 or part of $100, over $1Million.|
The Queensland Government has a stamp duty calculator on their website that can assist you in estimating how much stamp duty you’re likely going to have to pay. Similar apps are available on many financial institution websites as well.
Avoid paying stamp duty on the home by building
A huge advantage of building a new house over purchasing a pre-existing home is you’ll only need to pay stamp duty on the land component. Any construction won’t add to your stamp duty which could be great news for your budget. The reasons behind this are because you’re building the home, you’re not technically making a transfer.
The same sliding scale applies, with stamp duty increasing with the cost of your land.
Though a house and land package is sold as a single transaction, you’ll still only have to pay stamp duty on the land component of the deal. This is because you’re buying vacant land and building a new home on top of it.
If you play your cards right, you could end up spending less for a brand-new house than a pre-existing house, due to both less stamp duty and government incentives for new homes. The money you save from both these factors can easily be tens of thousands so it’s worth looking into. Knowing the right steps can make all the difference when it comes to saving money with your build. We can help you with that!
How We Can Help You
Building a home is one of the biggest decisions you’ll ever make in your life. At Buildi, we’ll be there throughout the entire building process, guiding you step by step so you can avoid any pitfalls. We will help you by following these steps.
- Free Consultation – We will sit with you to understand what you are looking to accomplish.
- Due Diligence – We work with you to ensure you’re buying the right block of land at the right price without hidden problems.
- Builders tender – We will take your requirements out to the market of builders and they will bid to win your business.
- Present solutions – We will compile the top 3 options and present you with a comprehensive proposal on builders’ strengths & weaknesses along with prices and specifications.
- Contract Signing – We will work with you and your selected builder to ensure there is full transparency in what you are entering into.
- Building your home – We work closely with the builder to ensure all service levels are met and your project is on schedule.
Other incentives in place for people who build their own homes?
Once you realise stamp duty could cost you tens of thousands of dollars, the first thing you’ll want to know is whether there is any way to pay less stamp duty for your dream home. The good news is, there might be.
There is a range of incentives for those planning to build a new home. The most well-known is the first home buyers grant, but there are also others including:
The QLD Stamp Duty Concession (or Rebate) can help a first-home buyer save up to $8,750. Stamp duty concessions are well worth it if you can get them.
Home Concession – this allows a lower rate of duty (when buying a second home or any home that isn’t your first). Applies to the first $350,000 of the value of your residence. To qualify, you need to move into the house in question within one year of settlement.
First Home concession – This is a lower home concession rate of duty plus a rebate that can lead to no duty being paid. You must have never owned a home previously and the home must be valued at under $550,000. This is a great deal if you qualify as it can save you up to $15,925.
First home vacant land concession – This is a grant for vacant blocks under $400,000 in value and can potentially save you up to $7,175.
How eligible you are for any of the above depends on your situation. Your best bet is to speak to your financial or building broker about what grants and incentives you’re likely eligible for. All of the above can be claimed after the transfer. In this scenario, you’ll pay the full amount of stamp duty and then receive some of the money back.
For an in-depth view of everything you need about the First Home Owners Grant, click here to read our guide.
Talk to an experienced building consultant to learn more about how you can take advantage of these incentives
In certain situations, building a house can be a more affordable option than buying a pre-existing house. There are many incentives, grants and other methods that could save you money if you know about them. Most people could use a little help when it comes to navigating the building world. At Buildi, we can help you with every step of the building process from performing due diligence to choosing a builder to make sure everything in your contract is delivered. So if you’re looking for some to be your advacate along your building journey, get in touch with Buildi today!