What is Transfer Duty / Stamp Duty?
Transfer duty, commonly referred to as stamp duty, is a tax imposed by state and territory governments on property transactions. This duty generally applies to purchases and transfers of property for various purposes, such as owner occupation or investment, and of various types, such as residential, commercial, industrial, farming property (including vacant land), business assets, etc.
Purpose of Transfer Duty
The primary purpose of transfer duty is to generate government revenue and regulate real estate transactions. It is payable when a property changes ownership, whether by sale, gift or certain family and related-party transfers.
When Does Transfer Duty Apply?
- Buying a home (new or existing residential property)
- Purchasing a holiday home or investment property
- Acquiring vacant land for development
- Transferring ownership through family or related-party arrangements — note that transfers to beneficiaries under a will are generally exempt from duty or attract only nominal duty
- Other transactions that may trigger transfer duty, such as declarations of trust over property, acquisitions of interests in landholding entities and, in Queensland, transfers of certain business assets
Example Scenarios
- A first-home buyer purchasing a $500,000 house must pay transfer duty calculated using the relevant duty rate in the state where the house is unless the buyer is eligible for any first home transfer duty concession.
- An investor buying an apartment at market value will incur stamp duty based on the purchase price.
- A family member receiving a property as a gift is generally liable for transfer duty assessed on the property's market value, though some transfers (e.g. between spouses in certain circumstances) are exempt — check the position in your state. Keep in mind that gifting or transferring property between family members may also trigger a capital gains tax (CGT) event for the person transferring it, even where no money changes hands.
How stamp duty is calculated
Stamp duty is worked out on the property's price or market value (whichever the state uses) on a sliding, progressive scale — the higher the value, the higher the rate applied, so duty rises faster than the price itself. Each state sets its own scale and thresholds, which is why an identically priced home attracts different duty in different states. For the exact figure on your purchase, use the relevant state revenue office calculator or ask your conveyancer.
First-home buyer concessions
Most states offer first-home buyers a full exemption or a reduced (concessional) rate up to value thresholds the state sets — above the top threshold, full duty applies. Eligibility usually turns on it being your first home, your residency status, and whether you'll live in it. Because the thresholds and rules change with each state budget, confirm the current position with your conveyancer or state revenue office before relying on a concession. Foreign buyers, by contrast, pay an additional surcharge on top of standard duty — see stamp duty for foreign buyers.
When you pay it
Stamp duty is generally paid at or around settlement, and the exact deadline varies by state. See when you pay stamp duty.
Is Transfer Duty / Stamp Duty Tax Deductible?
Generally transfer duty is not tax deductible but may be taken into consideration when calculating capital gains tax depending on the property use.
Owner-Occupied Homes
For owner-occupied residential properties, transfer duty is not tax deductible. It is considered a capital expense and cannot be claimed as a deduction on personal tax returns. If the property qualifies as your principal place of residence, you may be exempt from paying capital gains tax when selling the home.
Investment Properties
For investment properties, transfer duty is not immediately deductible but may reduce capital gains tax when the property is sold. Transfer duty can be added to the cost base of the property, lowering taxable capital gains payable.
Relevant ATO Guidelines
For rules and information on deducting transfer duty from the property cost base to calculate capital gain tax, refer to the ATO's guide on How to calculate CGT.
For rules and information on investment income deductions, refer to guidance on the ATO's guide on Interest, dividend and other investment income deductions.
For taxation and accountancy advice please consult your personal financial advisor for more details.