Stamp Duty

Stamp duty - officially transfer duty in most states - is a tax levied by each state and territory revenue office on the transfer of property. The buyer pays it, in cash, at or before settlement. The rate is set by the state where the property sits: there is no national rate. The differences between states run to thousands of dollars on the same price. On a $1 million home in Sydney the duty is roughly $40,000, and first home buyer concessions can cut it to nothing in several states.

The duty sits outside the comparison rate on your mortgage - it is a government charge, not a fee. It cannot be borrowed as part of most home loans, because lenders will not include it in the secured amount. It is payable on top of the deposit, which is why the true cash requirement is the deposit plus the duty plus legal fees. First home buyers and pensioners have concessions in every state, and the thresholds differ enough that the concession is worth checking before the contract is signed.

Each state revenue office publishes its own rate scale, and the scales are progressive: the marginal rate rises with the price. In New South Wales, duty on a $1 million home is $11,222 plus 4.5 percent of everything above $372,000, which lands at roughly $40,000. In Victoria the middle brackets are steeper: an $800,000 Melbourne home carries roughly $44,000 - more duty than the more expensive Sydney price, which is the kind of state-by-state arithmetic the stamp duty calculator exists for.

The timing is the part people miss. Duty is due at settlement, in cash, alongside the deposit - there is no instalment plan and no rolling it into the loan. Off-the-plan purchases in several states defer or discount the duty until the contract settles or occupancy begins, which changes the cash-flow picture but not the ultimate bill. Concessions are claimed through the revenue office, not the bank, and each state's first home buyer thresholds are published on its revenue website.

The arithmetic compounds into the deposit conversation. A 20 percent deposit on a $1 million home is $200,000, and the duty adds roughly $40,000 of cash on top - a fifth again of the deposit, due on the same day. Buyers who budget the deposit alone arrive at settlement roughly $40,000 short, which is the gap that either delays the purchase or drags in family.

For an Australian reader, stamp duty is the second-largest cash cost of buying a home after the deposit. It is also the one the property marketing never mentions. Each state revenue office publishes its own scale, and the differences between states are large enough to change which suburb is affordable. MoneySmart's guidance on buying a home lists the duty among the upfront costs alongside legal fees and inspections. It also sits outside the comparison rate, and the comparison rate entry covers why government charges sit outside that number.

A colleague named Brent (yes, that Brent) budgeted a 10 percent deposit on a $900,000 Melbourne purchase and forgot the duty entirely. The bill arrived at roughly $50,000, and the State Revenue Office does not send a polite reminder. The purchase survived only because his parents lent him the gap interest-free. The highest-leverage thing most Australians can do is price the duty before making an offer. Run the stamp duty calculator on the actual purchase price, add it to the deposit, and treat the total as the real cash requirement.