Do I have to pay stamp duty on a new home?

Are you unsure about whether you have to pay stamp duty on a brand new home or not? We explain how stamp duty works and why you’ll save thousands by having a new home built.

Do I have to pay stamp duty on a new home?

We often find that our customers are confused as to whether they have to pay stamp duty when they purchase a new home or have a new home built to put on the land that they already own.

We’re happy to tell you that you won’t have to pay stamp duty on a newly built home and we’re going to explain why!

What actually is stamp duty?

Stamp duty is a tax that’s payable to the revenue department of your state or territory whenever there’s a transfer of ownership of a property. But stamp duty isn’t only payable on property transfers. It’s also payable on motor vehicle registrations and transfers, leases, hire purchase agreements and insurance policies.

According to the Property Council of Australia, stamp duty was first introduced way back in 1865 in New South Wales. The other states and territories also jumped on board at a not-too-much later stage.

It’s important to note that stamp duty is a significant source of revenue for all state and territory governments. In fact, an article on realestate.com.au which was published in February this year (2024) states that around 5.5% of all government revenue in Australia came from stamp duty in 2021.

Wow, that’s a lot of revenue!

So how does it work?

In NSW, stamp duty is known as transfer duty. This will give you a much better idea of what the fee actually is and how it’s charged.

According to Revenue NSW, you’re only required to pay transfer duty when you purchase any type of property that has previously been owned by someone else. This includes an existing home that has previously been lived in, a holiday home, an investment property, vacant land, a farming property, a commercial or industrial property or any business property that includes the land.

We’re getting a bit technical here, but you also have to pay transfer duty if you acquire an interest in land without buying it outright. This is in situations such as through a trust, a gift or any transaction that will change the beneficial ownership of a property.

The only exceptions where you can be exempt from paying stamp duty or transfer duty are if you’re the beneficiary of a deceased estate, or there’s a transfer of ownership between the partners of a married or de facto couple.

Stamp duty only applies to the land and not the new home.

When you purchase a block of land, you’ll have to pay stamp duty or transfer duty because the land has previously been owned by someone else. However, if you’re a first home buyer in NSW – and other states as well – you can get a stamp duty exemption through the First Home Buyer Assistance scheme.

The stamp duty is worked out on the total value of the land. For example, here are the rates as at the 3rd of July 2023:

Property Value Stamp Duty Rate
$0 to $16,000 $1.25 for every $100, with $10 as a minimum
$16,000 to $35,000 $200 plus $1.50 for every $100 over $15,000
$35,000 to $93,000 $485 plus $1.75 for every $100 over $32,000
$93,000 to $351,000 $1,500 plus $3.50 for every $100 over $87,000
$351,000 to $1,168,000 $10,530 plus $4.50 for every $100 over $327,000
$1,168,000 to $3,505,000 $47,295 plus $5.50 for every $100 over $1,168,000

When building a new home, the good news is that stamp duty is only payable on the value of the land and doesn’t include the value of the new house that is to be built. This is because the new house has never been owned or lived in before so there’s no actual transfer of ownership.

So essentially, if you’re planning to build a brand new home, you won’t have to pay stamp duty because no transfer of ownership has taken place. You’ll only have to pay stamp duty on the value of the land.

And that’s quite a saving!

You can get an idea of how much stamp duty you’ll have to pay on the land by using this handy online stamp duty calculator. The transfer duty on the land will have to be paid within three months after signing the contract for the purchase of the land.

Building a new home has its advantages!

This is just one more advantage of building a new home over buying an existing one. Especially if you’re not a first home buyer and you don’t qualify for any of the government home buyer assistance schemes.

As you can see from the table above, not having to pay stamp duty on a newly built home is going to save you thousands of dollars. Plus, you’ll get a lovely new home that no one’s ever lived in before!

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