Duty on us all to avoid buyer’s trap

Stamp duty can be a sizeable portion of total home cost for buyers, writes Tim McIntyre

STAMP duty is one of the major hurdles for would-be homebuyers around Australia, so it is important to understand what you are in for before applying for a mortgage.

Stamp duty is a tax that must be paid up-front when buying a property, which means that not only must a borrower save a deposit — which is hard work in a low interest rate environment — but also more than $20,000 extra in most cases.

The latest CoreLogic figures show that the average of the median house prices in all Australian capital cities is roughly $570,000. A 20 per cent deposit on a house of that price is $114,000, but by the time stamp duty is addedalong with building and pest reports, conveyancing fees, mortgage application or approval fees, removalist costs and insurance- the up-front cost can be closer to $150,000; depending where you live.

Victoria is the most costly state, with a $570,000 house costing $30,810 in stamp duty, transfer fees and mortgage application fees.

This figure is revised down to $16,175 for first home buyers and from July 1 this year, first home buyers can avoid paying stamp duty on homes worth up to $600,000 provided they live in them for at least 12 months. In New South Wales the State Government this month announced it would scrap stamp duty for first home buyers on existing homes and new homes up to $650,000. Stamp duty discounts on homes up to the value of $800,000 will also apply. Stamp duty charged on lenders’ mortgage insurance will be abolished. The changes kick in on July 1.

The Northern Territory knocks $10,000 off its stamp duty of $28,499 for first home buyers, while South Australia charges everyone a hefty $29,713 on a $570,000 house.

That same house in Western Australia or Tasmania would set you back just over $21,500 in stamp duty, while the ACT takes $17,357 from the purchaser of the home and Queensland charges a relatively low $13,137. Stamp duty must be paid within 30 days of a property purchase and goes straight into government coffers. Mortgage Choice CEO John Flavell said the tax is a “cash cow” for some states.

“One of the biggest challenges for first home buyers is saving a deposit,” Mr Flavell said. “We need state governments across Australia to think about this financial tax and potentially think about reducing it for all first home buyers