The 2020 Victorian State Budget has been a positive one for homebuyers, providing many with an opportunity to get into the market earlier with changes to stamp duty. While Victoria has decided that they wouldn’t follow down the same path of New South Wales in transitioning away from stamp duty, they have announced that there will be cuts to stamp duty for homebuyers.
What are the changes to stamp duty in Victoria?
The changes that were revealed in the 2020 Victorian State Budget, were focused on ensuring that the property market remains resilient, and jobs in the residential property construction sector remain in place. The two changes that were announced apply to properties with a dutiable value, which means the price you paid or market value depending on which is greater, up to $1 million.
- A stamp duty discount of 50% for new residential properties;
- A stamp duty discount of 25% for existing residential properties.
To be eligible for the discount, the purchase contract for the property must be entered into between 25 November 2020, and 30 June 2021. This doesn’t necessarily mean that your property must be built by 30 June 2021, particularly if you’re buying an off-the-plan property, but rather that the property contract is entered into between the buyer and vendor.
Will the discounts apply to investors as well?
Unlike a number of typical property measures that are solely available to owner-occupiers, the stamp duty discounts appear to apply to investors as well. The same criteria regarding the purchase price and date that the property contract is entered into continue to apply for both groups.
The overall impact that this has on the Victorian property market, and whether it will entice property investors back into the market, or purchase their next property faster will only become evident with time.
How much of a saving does this represent?
The savings in stamp duty can be quite substantial for many households. Let’s consider a simple scenario to illustrate the potential savings for somebody looking to buy both a new off-the-plan property and one looking to purchase an existing residential property.
Samantha is currently looking to upgrade her own home and identifies an off-the-plan opportunity in Melbourne for a purchase price of $800,000. She enters into the purchase contract as of 1st February 2021, so meets both of the criteria to be eligible for the stamp duty discount. Ordinarily, Samantha would be liable for a stamp duty expense of $43,070, however with the discount she will only need to pay $21,535, representing a discount of $21,535.
Joel is looking to purchase an existing home rather than purchase off-the-plan and find an opportunity in Melbourne for a purchase price of $750,000. He enters into the purchase contract on the 15th January 2021, so again meets the criteria to be eligible for the discount available for existing properties, which is 25%. Ordinarily, Joel would be up for a stamp duty bill of $40,070, however, because he now receives a discount, this would be reduced to $30,052.50, representing a discount of $10,017.50.
What should I do next if I’m looking to buy property in Victoria?
We would suggest that you seek professional advice from your mortgage broker, conveyancer or solicitor, and buyer’s agent if you are looking to utilise the services of a professional team to find the property for you. It’s also important to do your homework upfront and ensure that you’re clear on what discounts you may be eligible for and what your expenses will look like.
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General Advice Warning: The information contained herein is of a general nature only and does not constitute personal advice. You should not act on any recommendation without considering your personal needs, circumstances and objectives. We recommend you obtain professional financial advice specific to your circumstances.