Buying your first home requires consideration of many things, including unavoidable expenses, like stamp duty. But what if you could save money on these? Stamp duty Victoria makes this possible, with eligible first-home buyers benefiting from exemptions and concessions while saving for their first home.
But at first, understand the concept of stamp duty. Stamp duty is an unavoidable expense that buyers incur when buying any property or vacant land. However, buyers can avoid paying higher stamp duty if they meet the eligibility requirements of the FHOG (First Home Owner Grant).
Eligibility Requirements of Stamp Duty Victoria Relief Under FHOG
First-time home buyers must meet the following requirements to be eligible for stamp duty relief in Victoria under FHOG:
- The buyers must be buying a home for the first time.
- They should not have received any of the first homeowner grants earlier.
- They must be 18 years or older.
- Buyers must have resided in a home for at least 6 months after buying it.
- They must be Australian citizens or permanent residents.
- The purchased home must be the principal place of residence for at least 12 months after buying.
- Buyers must have purchased their first home from 1st July 2017 to 30th June 2021.
Available Concessions and Exemptions Under FHOG
After buyers confirm eligibility, they can take advantage of available concessions and exemptions. If the intended property’s dutiable worth is 600k or less, then the buyers will get a 100% duty exemption. Dutiable property value means the amount buyers pay for the property or its market value, whichever is greater, including any GST amount. However, if they purchase a home worth more than 600k but less than 750k, then the concessional rates will apply.
For example, if a home’s dutiable value is $605k, the normal duty is $31,370, but with a concession, it will only be $1,045. The same slab continues like this as the dutiable value increases to $750k. Furthermore, if buyers purchase any vacant land to build their first home, then they will also get an exemption/concession.
Additionally, the buyer must move into the home either within 12 months of gaining occupancy or within 36 months of settlement, whichever occurs first. Apart from this, the government offers a $20k grant to first-time homebuyers in regional Victoria. However, if first-home buyers purchase their first home from 1st July 2021 apart from in regional Victoria, they will get a $10,000 grant.
Calculation of Stamp Duty Victoria
The Victorian government follows a simplified approach to stamp duty calculations. In this case, the sliding scale starts with a property value of $25k, for which eligible buyers need to pay 1.4% stamp duty. The same scale continues but with an increasing rate of 6.5% depending on property value. For example, for properties valued between $25k and $130k, stamp duty is $350 plus 2.4% on the amount above $25k.
Likewise, for properties valued between $130k and $960k, stamp duty is $2,870 plus 6% on the amount above $130k.
Categories of First Home-Owner Buyer Scheme
Under FHOG, first-home buyers in Victoria can apply for these categories:
Regional Home Guarantee
The first-home buyers who are planning to buy their homes in regional areas can take advantage of this scheme. This scheme helps first-home buyers improve affordability, enabling purchases with a smaller deposit and without paying costly LMI premiums.
First Home Buyer Guarantee (FHBG)
With this initiative, the government provides support to eligible homebuyers so they can buy their homes sooner. It provides a guarantee of a home loan of up to 15% of the property value with as little as a 5% deposit. Additionally, the scheme also allows first-home buyers to save their funds since they don’t need to pay LMI.
Key things to consider while applying for stamp duty in Victoria
To get most of the stamp duty Victoria, the first home must ensure the following things while applying for it:
- Eligibility Criteria: First-home buyers should ensure that they fully know which properties they need to buy, their property value, and the concessions they can get. Additionally, they must ensure the home buying confirmed all the residency rules, grant-related restrictions, and prior homeownership restrictions.
- Dutiable Value: Before applying for stamp duty, clearly understand its concept. This is because it greatly impacts the relief the buyers get over stamp duty. Generally, it’s based on the property’s market value or the purchase price, whichever is greater.
- Residency Within 12 Months: For getting stamp duty relief in Victoria, the buyers are required to reside at least 12 continuous months in the purchased property. This action will maintain their eligibility for stamp duty relief.
- Required Documents: To get eligibility, first-time home buyers are required to have all the documents, like proof of age, citizenship or permanent residency, and purchase agreement details.
- Budget Planning: Since paying stamp duty is an unavoidable expense, budget planning is crucial. The buyers should plan their budget before searching for the property. For this, they can calculate the required stamp duty they need to pay depending on the property value along with estimated upfront costs.
Affordable Housing Benefit of Stamp Duty Relief in Victoria
During ongoing affordable housing challenges, stamp duty relief can significantly benefit first-time homebuyers. They can get the benefit of reduced upfront costs since stamp duty is the major upfront cost while buying a home. For instance, first-home buyers can avoid paying excessive stamp duty on properties valued up to $600k by getting a 100% tax exemption.
Additionally, the initiative can substantially help downsize larger home loans while saving funds from stamp duty. Homebuyers can even think of building new homes with stamp duty concessions. Thus, overall, stamp duty relief is a beneficial measure to improve affordable housing, especially for first-home buyers.
Challenges With Stamp Duty Victoria
Though stamp duty relief offers the unique benefit of affordable housing, it also involves certain challenges:
Limited Eligibility For Concessions
Stamp duty exemptions are available to first-home buyers, but they are only applicable to properties valued up to $600,000 or less. Further, if the desired property value lies between $600,001 and $750,000, the concessions will be given. However, this criterion restricts buyers to homes within limits, requiring higher stamp duty and upfront costs for properties exceeding these thresholds.
Complexity of the Application Process
To be eligible for stamp duty relief, the government follows a complex application process under FHOG. The process can impact first-home buyers’ potential to get concessions and exemptions. As a result, they might not get the required benefits that they should under this scheme.
Financial Challenges
Despite stamp duty relief, first-home buyers may encounter financial challenges. This is because they still need to pay other upfront costs like property inspection costs, legal fees, mortgage registration fees, and LMI (Lender Mortgage Insurance). As a result, they will be left with little savings after buying their first home.
Market Volatility
The property market is subject to frequent changes, which may impact first-home buyers’ potential to buy their first home with stamp duty relief. For example, currently, the demand for affordable housing is increasing, which is increasing the market competition. As a result, buyers might need to purchase properties of high value above the required threshold of stamp duty relief.
Time Constraints on Home Occupancy
It’s an essential criterion of stamp duty relief that the buyers need to occupy their home within 12 months of settlement. However, buyers who are building their homes might encounter challenges due to construction delays. Thus, this situation can result in losing all the benefits altogether.
Conclusion
Therefore, stamp duty relief in Victoria provides significant benefits for first-home buyers, including a little deposit and savings on other upfront costs. This relief in turn improves housing affordability during the ongoing housing supply challenges. However, it also poses certain challenges like limited eligibility concessions, a complex application process, market volatility, financial challenges, and time constraints on home occupancy.
Thus, first-home buyers must ensure that the property they buy falls into the eligibility criteria. Additionally, they must consider factors like dutiable property value, time constraints, and required documents.
For more such valuable insights, contact us at Nfinity Financials or call us at 1300 GET LOAN or 0456 456 267.
FAQs
These are some of the frequently asked questions by our readers.
Q1. How much is the stamp duty relief in Victoria?
The first home buyers can get a 100% exemption on their first home if the property is valued at $600,000. Further, if the property is valued beyond $600,000 but less than $750,000, then the concession rates will apply.
Q2. Can you still qualify for stamp duty relief if you are purchasing vacant land?
Yes, first-home buyers can also qualify for a stamp duty exemption/concession if they are purchasing vacant land. However, the intent should be to build their first home, and the land value must meet eligibility criteria.
Q3. How do you apply for the stamp duty exemption or concession?
First-time buyers must complete a Digital Duties Form via their solicitor or conveyancer during the property transfer to claim benefits. Additionally, they must ensure that all eligibility criteria are met before submission.
Q4. Can you use your stamp duty savings to make a deposit?
Yes, stamp duty relief in Victoria allows first-home buyers to save significantly on their upfront costs. The savings in turn led them to allocate those funds towards a home loan deposit and other new home-buying-associated expenses.
