Stamp duty on land transfer

Stamp duty is payable on any transaction that results in a change of beneficial ownership of land and associated real assets.
Properties bought as a principal place of residence attract a lower marginal rate for certain dutiable values. Effective on or after 2008-09 Budget day, there will be an adjustment of approximately 10 per cent to the general rate of stamp duty and principal place of residence concession thresholds while leaving all tax rates unchanged.

The new rates of duty are shown in Table 4.4.

Table 4.4: Duty on land transfer

General land transfer duty rates

Value of property transferred Duty payable
Up to $25 000 1.4% of the value of the property
$25 001 - $130 000 $350 plus 2.4% of the value in excess of $25 000
$130 001 - $960 000 $2 870 plus 6% of the value in excess of $130 000
$960 001 and over 5.5% of the value of the property

Land transfer duty rates for principal place of residence purchases

Value of property transferred Duty payable
Up to $25 000 1.4% of the value of the property
$25 001 - $130 000 $350 plus 2.4% of the value in excess of $25 000
$130 001 - $440 000 $2 870 plus 5% of the value in excess of $130 000
$440 001 - $550 000 $18 370 plus 6% of the value in excess of $440 000
$550 001 - $960 000 $28 070 plus 6% of the value in excess of $550 000
$960 001 and over 5.5% of the value of the property
Source: Duties Act 2000

Victorian first homebuyers who qualify for the government’s $7 000 First Home Owner Grant are also eligible for a $3 000 First Home Bonus for homes valued up to $500 000.
The value of the bonus increases to $5 000 for purchases of newly constructed homes, and is available until 30 June 2009.
The 2008-09 Budget provides for an additional $3 000 First Home Bonus for eligible first homebuyers purchasing newly constructed homes in regional Victoria, for contracts entered into on, or after, 2008-09 Budget day and will also be available until 30 June 2009. This brings the total assistance for such purchases to $15 000.
In addition, first homebuyers that qualify for the bonus on or after budget day are also eligible for the concessional rate of duty for principal places of residence (PPR). This replaces the current requirement for first homebuyers to elect between the two. For a first home buyer purchasing a home at the median first home buyer price ($317 000) the extension of the PPR concessions and the threshold adjustments equate to a $2 460 saving. These arrangements are summarised in Table 4.5.

Table 4.5: First home buyer support

Established homes New homes
Metropolitan Regional
First Home Owner Grant $7 000 $7 000 $7 000
First Home Bonus (a) $3 000 $5 000 $8 000
Access to principal place of residence
concessional rate
Yes Yes Yes
Source: Department of Treasury and Finance
Note:
(a) For homes valued up to $500 000 and for contracts entered into before 1 July 2009.

First homebuyers with families have the option of a full duty exemption in lieu of the First Home Bonus when they purchase property worth not more than $150 000, with a partial exemption available for property worth not more than $200 000.

This budget also introduces a stamp duty exemption for homes transferred into special disability trusts in recognition of the particular nature of the arrangements for persons with a severe disability.
The budget also increases the thresholds for duty concessions on property purchases for pensioner and concession cardholders. A full stamp duty exemption will now apply to property purchases valued up to $330 000, while a partial exemption will apply to purchases valued over $330 000 up to $440 000.

Furthermore, a corporate reconstruction exemption will provide relief to certain stapled real estate investment trusts in circumstances that are consistent with the Commonwealth Government’s arrangements with respect to capital gains tax rollover relief. This will allow Australian Listed Property Trusts to become more competitive in off-shore markets and achieve stronger returns for Australian investors. It further supports this government’s objectives of cutting red tape and strengthening Victoria’s financial services sector.

Stamp duty revenue is expected to have grown unusually strongly by $913 million or 30.8 per cent in 2007-08 over 2006-07. The growth in revenue in 2007-08 is due to both increases in the volume of transactions and the average value per transaction. The increase in volumes may in part be attributable to changes by the Commonwealth Government to superannuation laws which appear to have generated extra buying and selling of properties, with some of the revenue accruing in 2007-08.
The increase in average value per transaction in 2007-08 is consistent with growth in property prices over the year. Solid economic growth, including significant growth in household financial wealth as well as strong population growth, have contributed, but changes in these ‘fundamentals’ cannot fully explain the increase in property prices.
It is expected that over the forward estimates period growth of property prices will re-align with economic fundamentals, as well as respond to the more recent interest rate rises and financial volatility. In particular, the increases in mortgage interest rates from August 2007, and the shock to financial wealth resulting from the decline in equity prices since November 2007, may relieve the upward pressure on property prices. The decline in auction clearance rates experienced so far in 2008 suggests that a re-alignment of the property market is already underway. The estimates assume that this correction towards fundamentals will occur over several years, and that property prices will stabilise over the estimates period.

The increase in interest rates, the neutral outlook for prices, and the absence of one-off superannuation impacts, suggest that there will be an initial easing in volumes, before modest growth returns towards the end of the forward estimates period. Before allowing for the measures announced in this budget, stamp duty revenue is expected to be broadly unchanged in 2008-09 and experience a small decline in 2009-10, before increasing slightly over the remainder of the forward estimates period.
The revenue impact from changes to the thresholds result in an expected decline in stamp duty in 2008-09 of $138 million (or 3.6 per cent) compared with the 2007-08 revised estimate.

Victorian State Budget | 6 May 2008