Death & taxes, it is said there is nothing certain in life except these two things.
When you want to purchase land in Victoria, you can’t escape the taxes or duty to transfer the property (Stamp Duty) into your name when you are a seller.
How is stamp duty calculated?
The stamp duty is worked out by the cost of the total value of the property, including any buildings at the time of the purchase. For example, if you were purchasing a $500,000 home as your primary residence, but not your first home purchased, you would be liable for duty of $21,970 to the state revenue office for the transfer.
Don’t stress tying to work it out yourself, though. One of the great tools offered by the state government is the stamp duty calculator. This tool is particularly handy if you are not sure about what you may be up for stamp duty-wise.
What does this mean for me?
If you’re a first home buyer, there is light at the end of the tunnel.
with the state government abolishing stamp duty for first home buyer purchases under $600,000 with a sliding scale from $600,000 to $750,000. This concession, along with between $10,000 and $20,000 grants for first homeowners in Victoria, means the playing field has been somewhat levelled in recent years when it comes to getting into the property market.
Although this helps first home owners enter the market for the next four years from July 1, 2017, the rest of the home buying market are subject to stamp duty, which is an unavoidable part of home ownership within Victoria.
What’s the difference for home buyers?
Although there is currently a housing price boom in the major capital cities – especially Melbourne – if a first home buyer was struggling to get into the market a regional or rural hub is the next best option.
For locations such as Ballarat, where the average house price is $410,000, you would need to get together 20% or $82,000, less your $20,000 FHOG which would equal $62,000 to make the purchase. There would also be legal and conveyancing costs to consider which are priced based on the complexity of the loan.
In contrast, someone who is not a first homeowner would need $82,000 deposit, $16,870 stamp duty + $500 to $3000 in legal costs. So more like $100,000 in cash before they can even get in the door – without mortgage insurance from the banks.
Where to from here?
Now is a good time to save as you have never saved before, develop a good savings history, look for a regional centre that can offer you good employment opportunities and has everything you are looking for in terms of public transport, shops and facilities to get yourself into the housing market.
For guidance on how to navigate the first homeowner’s minefield, speak to the team at McClure law today.