Land Tax and Stamp Duty Explained

So, you’ve got your eye on an off-the-plan apartment, it’s within your price range, you’re ready to put down the deposit, but be aware what the upfront costs may be. 

Whilst there are a few costs that can be factored into your home loan, there are others that are required to be paid upfront, and by a certain deadline — and this includes land tax and stamp duty for the residential property you have purchased.

Every state and territory has its own rules and regulations when it comes to these and, depending on the avenue you take, will determine which taxes you pay and how much they’ll set you back.

Here, we help take the confusion out of the process by explaining the difference between stamp duty and land tax, and when they apply to you.

How is land tax calculated and what is it?

Although it differs slightly from state-to-state, land tax is levied on the owners of land, regardless of whether income is earned from the land. 

Your land tax assessment is calculated by taking into account the total taxable value of your land holdings as at midnight on 31 December of the preceding year.

The taxable value of the property/land you own is usually the site value found on your council rate notice. The total is then calculated by applying the appropriate land tax rate to the total taxable value of your landholdings.

Click here for an example of how this works.

Do I have to pay it?

That depends — are you going to live in the property you purchased? Or rent it out and use it as an investment property? If you’re planning to use the property as your principal place of residence, then good news, this comes under the land tax exemptions Victoria and New South Wales have in their law, so skip ahead to ‘stamp duty’.

Otherwise, you will be required to pay land tax in both of these states if the property is not your home, and will instead be used as an investment property or holiday house, for example.

You may have to lodge forms for land tax registration if you have:
- bought or sold an initial or additional investment property a holiday home
- or experienced a change in circumstances, i.e. begun renting out your primary residence

As always, make sure to keep up to date with Victorian and NSW government websites for changes to policy and law.

How is stamp duty calculated and what is it?

Whether it’s regarding off-the-plan stamp duty or purchasing an existing property, the rules and regulations differ for each state and territory. But, as a general rule, anyone who buys a residential home is slugged with stamp duty tax, which must be paid within 30 days of settlement. There are some exemptions for first home buyers, however, if this is an investment or second home, always factor stamp duty into your budget. 

Incidentally, there is no difference between stamp duty and transfer duty, as they mean the same thing. The transactions where this duty is to be paid include:
- Certain leasing arrangements 
- Transfer of motor vehicles
- Declarations of trust

How much your stamp duty will cost you depends on a number of factors, including where you live and whether you have bought a home before. An off-the-plan stamp duty calculator is a great way to work out how much you’ll have to pay before taking the plunge.

Do I have to pay it?

If you’ve bought a residential property, the short answer is yes. However, the benefit with off-the-plan purchases is that you are often required to pay considerably less stamp duty and you may be able to defer liability for up to 12 months.

Let’s break that down: on a $240,000 off-the-plan apartment, it’s estimated you’ll save around $9,000 under Victorian stamp duty law. This exemption only applies to off-the-plan purchases on new developments.  

In New South Wales, first home buyers are exempt from paying stamp duty if the property costs no more than $800,000. However, you must occupy the property within 12 months of completing the purchase and live there for at least six consecutive months. 

This article is for general information only – we always recommend you seek professional financial advice before making any significant property purchase.

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