Guides, Property Buying

Property Buyers: Vital things you should note about stamp duty for a smooth settlement

Stamp Duty

Further to our previous blog advising sellers on the pros and cons of early or prior possession, this month’s tip is for buyers regarding stamp duty changes with effect from 1 June 2022.

WHAT IS STAMP DUTY?

Stamp duty, or transfer duty, is a government tax that is paid by someone buying or receiving ownership of land or property. In Western Australia, the higher the market value, the higher the rate of stamp duty that needs to be paid.

In WA, there are four rates of stamp duty that buyers can apply for:

  • General rate – For commercial property, rural property not used as a residence, or vacant land which does not qualify for a residential rate.
  • Residential rate – For places of residence, mixed use property, and rental homes. It also applies to land on which a residence is built within five years of the date the property is liable for duty.
  • Concessional rate – For a principal residence or WA business asset valued at below $200,000.
  • First home owner rate – For those who qualify for the first home owner grant or are eligible for the first home owner rate (there are various considerations).

WHEN IS STAMP DUTY PAYABLE?

This depends on the type of contract and is calculated from the latest contract date (on the Offer and Acceptance Contract signed by the seller and buyer). The information below applies to Western Australia:

  • In a typical contract – Stamp duty is paid at settlement, or within 12 months of the contract date (whichever is earlier). 
  • For an off-the-plan purchase or when the Certificate of Title has not yet been issued – Stamp duty is paid at settlement, or within 36 months of the contract date (whichever is earlier). 

Important points to note regarding stamp duty:

  • Extensions – In some cases, the Commissioner may grant an extension date or allow payment in instalments.
  • Penalties – If stamp duty is not paid on time, it may accrue interest or penalty taxes.
  • The conveyancer usually handles stamp duty payment to the OSR. The funds are typically included in the buyer’s loan or deposit paid to the conveyancer.

WHAT STAMP DUTY CHANGES TAKE EFFECT IN JUNE/JULY 2022?

In Western Australia, changes in stamp duty or transfer duty will take place as part of the state’s tax reform package. The intent is to simplify the way the Duties Act 2008 is administered to make housing more affordable to low income individuals and households. Key points regarding changes in stamp duty in WA follow.

From 1 June 2022, the existing off-the-plan transfer duty rebates for eligible transactions will be amended as follows: 

  • Purchasers will receive a 100% rebate for a dwelling valued at less than $500,000.
  • Purchasers will receive between 50% to 100% rebate for a dwelling valued between $500,000 and $600,000.
  • The existing rebate for a dwelling valued above $600,000 will remain at 50%.

These off-the-plan transfer duty rebates apply until 24 October 2023, to a maximum rebate of $50,000.

From 1 July 2022,

  • The general rate of transfer duty shall be aligned with the residential rate of duty, so that the lower rate is applied for all property transactions.
  • Purchasers will no longer need to apply for the residential rate of duty.
  • Rates of duty for assets valued below $200,000 will be decreased after the concession rate for small business and residential property transfers is revised.

HOW KDD CONVEYANCERS HELPS

Let KDD make things easier for you (whether you’re the buyer, real estate agent, finance broker). 

  • Timely OSR Lodgement – The contract of sale must be lodged within two months with the Office of State Revenue (OSR) by your settlement professional or conveyancer, so it’s best to appoint your conveyancer as soon as you sign the contract. 
  • Pay the right rate of stamp duty – You can potentially save time and money, as well as reduce stress, by engaging qualified conveyancing professionals like ourselves to look over your settlement contract (which sometimes runs to 100s of pages long!) and ensure that you are paying the right rate of stamp duty to facilitate a smooth property transfer.
  • When you don’t know what you don’t know – Our caring and experienced specialists can help you create a positive property settlement experience that is as supported, smooth flowing, and pleasant as possible. We have the people and technology to make it work out right for you. 

Ask us to find out how you could benefit from our input.