Stamp duty is a kind of levy which operates similar to a tax. Stamp duty in New South Wales is administered by the NSW Office of State Revenue.
Stamp duty is imposed on ‘dutiable transactions’. Some common examples of dutiable transactions include transfers of shares or units, and transfers of ‘dutiable property’ such as land. However, there are also a number of concessions and exemptions from stamp duty, the most relevant to individuals being the first home buyers’ scheme.
The rules for how stamp duty is imposed and how much duty is payable are contained in the Duties Act 1997. The NSW Office of State Revenue provides some guidance on how stamp duty is imposed and how concessions and exemptions are applied in a number of revenue rulings.
Stamp duty is imposed on ‘dutiable transactions’. What is a ‘dutiable transaction’ is defined by the Duties Act 1997. The most common kind of ‘dutiable transaction’ is a transfer of ‘dutiable property’ or an agreement to sell or transfer ‘dutiable property’. Other kinds of dutiable transactions which are likely to be less relevant to you include:
- declarations of trust (which may happen if you choose to hold property on trust for another person)
- mortgage foreclosures, and
- entering into a lease under which you have to pay a premium.
‘Dutiable property’ is defined very broadly in New South Wales and is very similar to the definition used in other States and Territories. However, there are some subtle differences that need to be watched out for, particular in relation to shares and units.
In New South Wales, it includes but is not limited to:
- shares and units which are not listed on the ASX
- options to purchase land, and
- ‘business assets’.
Generally speaking, the person who purchases the dutiable property is the one who has to pay stamp duty. When the liability to pay duty arises depends on what type of dutiable transaction was entered into. For example, if it was a transfer of land, the liability arose at the time of the transfer. If it was a declaration of trust, the liability arose at the time the declaration was made.
These rules are very important, because in order to pay stamp duty you must lodge any agreement under which the transaction occurred with the NSW Office of State Revenue for stamping. You may also be required to lodge a form, particularly if you are claiming an exemption from stamp duty or if the dutiable transaction occurred without a written agreement.
The lodgement must be made within 3 months of the liability to pay stamp duty arising. The duty itself must also be paid within that 3 month period. If you fail to comply with these strict deadlines, you may be required to pay penalties or interest on top of the duty.
How much duty you are required to pay depends on the ‘dutiable value’ of the transaction and the kind of property that is transferred. The ‘dutiable value’ is, generally speaking, the greater of the amount paid for the property, and the properties’ value free from any encumbrances.
In the case of land, depending on the ‘dutiable value’, a different rate of stamp duty applies. For example, if the ‘dutiable value’ is more than $1,000,000, the duty payable is equal to the sum of $40,490 plus $5.50 for every $100 that exceeds $1,000,000. These rates reduce as the dutiable value of the property decreases. Different rates however can apply in certain cases to residential land that is transferred.
In the case of shares or units, the rate is 60c per $100.
There are a significant number of exemptions and concessions from stamp duty in New South Wales. These depend on the kinds of property being transferred, and the relationship between the buyer and seller.
For example, if you are married and you transfer an interest in residential land to your husband or wife, the transfer may be exempt from stamp duty. Any transfers that are made after a divorce may also be exempt from stamp duty if they are made for the purposes of dividing the matrimonial property.
As mentioned above, shares and units which are quoted on the ASX are not dutiable property and so their transfer is exempt from stamp duty.
If you are a first home buyer in New South Wales and you purchase a house with a value of less than $550,000, you may be entitled to an exemption from stamp duty for the purchase. Whether the exemption is available will largely depend on whether you have owned residential property in Australia before, and the satisfaction of a period of residency requirement.
If the value of the house is between $550,000 and $650,000, you may also be entitled to a concession from stamp duty.
There is a form that must be lodged in order to claim the concession or exemption.