Land Transfer Duty (Vic)
Land transfer duty, formerly stamp duty, is a tax placed on the “dutiable value” of property being bought. The dutiable value is the property’s purchase price or the property’s value on the open market, whichever is higher. The tax is collected for the Victorian Government by the State Revenue Office and needs to be paid upfront. It is governed by the Duties Act 2000.
How is stamp duty calculated?
As with income tax, stamp duty is calculated using a sliding scale and standard rates. If a property’s dutiable value is $0 to $25,000, the rate is 1.4%; for property worth $25,001 to $130,000, the rate is $350 plus 2.4% for every dollar over $25,000; for property worth $130,001 to $960,000, the rate is $2870 plus 6% for every dollar over $130,000; and for property worth $960,001 or more, the rate is 5.5%.
Residential property waiver
Land transfer duty is discounted for buyers of residential property in Victoria with a dutiable value of up to $1 million. For new residential properties, the duty is halved, and for existing residential properties or vacant residential land, a 25% discount applies. This waiver applies in addition to almost all concessions.
To be eligible, the contract must be signed on or after 25 November 2020 and before 1 July 2021 and the purchase must be for consideration (not a gift).
Residential property is defined as land that can be lawfully used solely or primarily for residential purposes.
First home buyer exemption/concession/reduction
A first home buyer duty exemption applies to buyers of new or established property in Victoria with a dutiable value up to $600,000. The concession applies when the dutiable value is between $600,000 and $750,000. A 50% duty reduction may apply if the contract is dated before 1 July 2017.
If a buyer satisfies the requirements for a First Home Owner Grant, they are entitled to these benefits.
The home must be the buyer’s principal place of residence for at least 12 months from settlement.
Principal Place of Residence (PPR) concession
The PPR concession applies to a buyer of a new or established property with a dutiable value of up to $550,000, and the home is to be the buyer’s principal place of residence for at least 12 months from settlement. Depending on circumstances, the PPR concession can be combined with the first home buyer duty reduction or pensioner exemption or concession.
The PPR concession is a not available is the property was bought at a heavily discounted price or was a gift.
An off-the-plan concession applies to those buying house and land packages or a refurbished lot. The concession reduces the dutiable value of the property by the costs of construction or refurbishment on or after the contract date.
This concession is available only if a buyer qualifies for the principal place of residence concession (the dutiable value cannot exceed $550,000 after the off-the-plan concession) or the first home buyer duty exemption/concession (the dutiable value cannot exceed $750,000 after the off-the-plan concession). This means the home must be the buyer’s principal place of residence for at least 12 months from settlement.
Pensioner exemption and concession
A pensioner is entitled to a one-off duty exemption or concession when they buy a new or established home with a dutiable value of up to $750,000, as their principal place of residence.
To be eligible the pensioner must be the primary holder of an eligible concession card, which are certain cards from the Department of Veterans Affairs and Services Australia. These are usually issued to recipients of a Centrelink payment, pension or allowance.
Primary production land that incorporates bundled or unbundled water entitlements may be exempt from land transfer duty.
Farmers aged under 35 who are buying their first farm with a dutiable value of $750,000 or less are eligible for a one-off young farmer duty and exemption. For transfers made before 1 July 2018, a full exemption is available on farmland valued up to $300,000, and a partial exemption is available on land valued up to $600,000. A concession is available for farmland valued between $600,000 and $750,000. For transfers made on or after 1 July 2018, a full exemption is available on farmland valued up to $600,000, and a concession is available for farmland valued between $600,000 and $750,000.
A buyer can choose to receive either the young farmer duty and exemption, or the PPR concession. If no choice is made, the PPR concession is automatically applied.
Charities and friendly societies
Charities and friendly societies are entitled to an exemption from duty. The exemption applies to the transfer of property to a charity or friendly society and a declaration of trust over property held for a charitable purpose.
Foreign buyers of residential property are liable to pay Foreign Purchaser Additional Duty (FPAD) as well as land transfer duty. If the property is eligible for a land transfer duty concession, the FPAD is calculated before the concession is applied.
Foreign corporations and foreign trusts may be eligible for an exemption from FPAD.
A buyer is a foreign buyer if they are not a citizen or permanent resident of Australia, or a New Zealand citizen with a Special Category Visa (Subclass 444); or of they are a foreign corporation or foreign trust.
FPAD applies to any transfer of an interest in residential property, including a sale, a gift or a lease arrangement. The current FPAD rate (as from 1 July 2019) is 8%.
For advice or representation in any legal matter, please contact Armstrong Legal.