Stamp duty in New South Wales

Stamp duty in NSW, officially known as transfer duty, is among the most expensive in the country. It’s a significant cost when purchasing property, and a mandatory one, which can catch some buyers off guard. Whether you’re a first-time buyer or an experienced investor, it’s essential to understand how stamp duty works, how much it costs, and the exemptions or concessions available to you. Once you know how much you’ll owe, you can plan your property purchase without any hidden surprises.

What is stamp duty about?

A tax levied by the NSW State Government, stamp duty applies to both residential and commercial transactions and the amount payable depends on the property's value. Originally named after the rubber stamp officials used to sign off paperwork, the fee earns NSW approximately $10 billion in annual revenue which goes towards funding public services. This one-off payment is made at settlement, but needs to be paid within three months (longer periods apply when buying off the plan), so it’s crucial to factor it into your buying budget.

How is stamp duty calculated in NSW?

Since stamp duty in NSW is calculated on a sliding scale; the higher the property’s value, the more you will pay.

These rates can change annually, or during budget updates, but currently they range from 1.25% to 7%.

Here’s a simplified breakdown of how stamp duty is calculated:

• $0 to $17,000: $1.25 for every $100
• $17,000 to $36,000: $212 plus $1.50 for every $100 over $17,000
• $36,000 to $97,000: $97 plus $1.75 for every $100 over $36,000
• $97,000 to $364,000: $1564 plus $3.50 for every $100 over $97,000
• $364,000 to $1,212 million: $10,909 plus $.50 for every $100 over $364,000
• $1.212 million to $3.636 million: $49,069 plus $5.50 for every $100 over $1.212 million
• Homes valued at more than $3 million attract a premium duty rate

Example case study

Sam and Alex are buying their second home valued at $850,000, however they are not eligible for any exceptions or concessions. After consulting a stamp duty calculator, the pair were able to determine what their upfront costs would be. The first $364,000 will attract a $10,909 fee, then every $100 up to $850,000 would add $0.50. Therefore, their final stamp duty amount would be $32,779.

Stamp duty concessions and exemptions in NSW

To help first-time buyers get a leg up onto the property ladder, the state government offers incentives to either eliminate or significantly reduce stamp duty costs.

The First Home Buyer Assistance Scheme (FHBAS) allows first-time buyers to buy property valued up to $800,000 and not pay any stamp duty, resulting in savings of up to $30,873. For homes valued between $800,000 and $1 million, a concessional rate applies.

To qualify for an exemption or discount you must;

• Buy your first home under $800,000 to avoid the fee altogether, or purchase between $800,000 and $1 million for a discounted rate
• Purchase vacant land equal to or less than $350,000 to skip the duty, or buy a block priced between $350,000 and $450,000 to apply for a concessional transfer duty rate.

Additionally, some first-time buyers are eligible for the First Home Owner Grant (FHOG), which is separate from stamp duty. Those first-home buyers purchasing a new home under $600,000, may also qualify for the $10,000 grant as well as avoiding stamp duty.

Stamp duty for investors

For investors, stamp duty is a non-negotiable cost of doing business. Unlike first-time buyers, property investors do not receive concessions or exemptions on stamp duty in NSW. When purchasing an investment property, the full stamp duty applies based on the property’s value.

That said, while stamp duty is not deductible as an upfront tax deduction, it can be factored into your property’s cost base, which may help reduce your capital gains tax liability when you go to sell the property.

Exemptions for off-the-plan purchases

If you’re buying off-the-plan in NSW, you may qualify for a deferral of your stamp duty payment. This means you won’t need to pay stamp duty until the property is complete or the agreement is finalised (whichever comes first). This wriggle room gives buyers more time to budget and prepare for the hefty payment.

Budgeting for stamp duty

Unless you qualify for an exemption, stamp duty is an unavoidable cost that comes with buying a home. And at no small sum, it’s crucial to budget for it early on in your property search so you’re not caught out when you can lest afford it.

Use an online calculator specific to Western Australia so you have an accurate estimate of how much you’ll need to pay. Once you know the amount, factor it into your deposit, this way you won’t be borrowing to pay the bills. Ands finally, speak to a professional such as a conveyancer, solicitor or mortgage broker to provide you with detailed advice tailored to your situation.

Try the Mortgage Choice stamp duty calculator