When you buy a property in NSW, it’s not just the deposit you need to think about when considering your finances.
Stamp duty is one of the extra costs you might have to pay, but it’s not always clear to new buyers what that involves. Let’s look at what stamp duty is, how it’s changing in NSW and whether or not you need to pay it on your next property.
What is stamp duty?
Stamp duty is a one-off government tax that buyers pay when they purchase their property, designed to go towards the cost of the legal documents involved in changing a property’s ownership. It’s now technically called “transfer duty” in NSW, but most people still refer to it by its old name unless it’s on an official government website or document.
Stamp duty usually needs to be paid within three months of the contract exchange, but can be deferred for up to 15 months if you’ll be living in the property instead of renting it out.
How much is stamp duty for your property?
The amount of stamp duty that you need to pay depends on how much you’re paying for the property. It’s based on a sliding scale, which you can view here, or you can calculate the exact amount using this handy tool.
For example, buyers of a two-bedroom unit that sells for the Alexandria median of $829,000 would pay stamp duty of $32,795, because it falls into the second-highest bracket. A median-priced townhouse in Erskineville at $1.32m would have stamp duty of $58,090 in the highest bracket.
It’s worth noting that these rates are different for first home buyers (who receive exemptions, as explained below) and foreign buyers (who pay an additional 8% surcharge).
Stamp duty exemptions
In 2017, the NSW Government introduced a new policy to make it easier for first home buyers to enter the market. Part of this policy was the removal of stamp duty for properties valued up to $650,000, as well as a lower rate for properties between $650,001 and $850,000.
As stamp duty for a $650,000 property is currently just over $25,000, this is a huge saving for first home buyers that could enable them to buy a better property or keep that money to put towards their mortgage. There are plenty of excellent opportunities available in Sydney’s inner city in this bracket too, like this one-bedroom apartment in Alexandria.
There are of course a few eligibility criteria related to being a genuine first-time buyer, never receiving the exemption previously and occupying the property as your home. You can read them in full here.
Stamp duty reform in NSW
NSW stamp duty hasn’t been changed since it was first introduced in 1986, meaning the price brackets and their respective rates have never been adjusted in line with the Consumer Price Index (CPI). As a result, Sydney buyers are paying the highest stamp duty rates simply because house prices have increased hugely in that time.
This is the reason behind reform being introduced on 1 July 2019, which would connect stamp duty to CPI, so the brackets would rise along with inflation. In the short-term, this will save buyers around $500 according to the State Government, but these savings will only grow with time.
Looking for a property in Sydney’s inner city? Get in touch with me today.