The Hidden Costs of Buying Property You Need to Consider
Australia is known for looking out for the best interests of the nation and its people – and this applies in property as well. In doing so, there are a number of federal, state and locals measures in place centred on taxes and fees.
Here are five costs that all citizens, residents, and foreign investors should consider before buying a property in Australia.
The Australian government imposes stamp duty on all property purchases. Stamp duty (also called transfer duty) is a tax designed to cover the costs of documents and transactions, such as property transfers.
How much transfer duty you pay is determined by the property’s value and the state in which you are buying.
In New South Wales, Victoria (called Land Transfer Duty), Queensland, and the Northern Territory, stamp duty is based on the price you paid for the property or its market value, whichever is greater, and the cost is calculated on a sliding scale (different rate in each state).
In South Australia, Western Australia (called Transfer Duty), and Tasmania, stamp duty is calculated by the value of the property, and the cost varies in each state. Conveyance Duty in the Australian Capital Territory is also calculated according to the value of the property, and properties with a value of $1.5 million or less pay no duty.
Land tax is an annual tax levied on property owned above the state-determined land tax threshold. Your principal place of residence is typically exempt from land tax. The money goes to the state to fund community services and projects such as emergency services, healthcare, infrastructure, etc. Like stamp duty, land tax varies state by state, except in the Northern Territory, there is no land tax to pay.
Land tax in New South Wales is calculated on the total value of all your taxable land above the land tax threshold. The thresholds for land values change each year, as published in the Government Gazette every October. If the combined value of your land does not exceed the threshold, no land tax is payable.
If the total taxable value of all the Victorian land you own is equal to or exceeds $250,000 you will be required to pay land tax. The rate of tax you pay depends on the total taxable value of all your taxable land. And in Queensland, land tax is calculated on the total taxable value of your Queensland freehold land above a threshold of $600,000.
Land tax in Western Australia is an annual tax on land not used as your principal place of residence. The rate of land tax differs according to the taxable value of the land, varying from a flat rate of $300 for properties valued between $300,001 and $420,000 up to 2.67 per cent for property valued at $11 million and above.
Land tax in South Australia is calculated on the total value of all your taxable land above the land tax threshold. The thresholds for land values change each year, as published as a notice in the Gazette every July – view the 2020 document.
In Tasmania, land tax is an annual tax payable on property outside of your principal residence. The rate of tax you pay depends on the total taxable value of all your taxable land in Tasmania. Rates vary from 0.55 per cent on property valued above $25,000 to 1.5 per cent for property valued above $350,000.
Land tax in the Australian Capital Territory is assessed quarterly on 1 July, 1 October, 1 January and 1 April each year. The amount of land tax you pay is made up of two components: a fixed charge of $1,326, plus a valuation charge, ranging from 0.62 per cent for property valued between $150,000 and $275,000, up to 1.12 per cent for property valued at more than $2 million.
Council rates are local government taxes, and how much you pay will depend on the value of your property and where it is located.
The money goes to your local council to fund public or community services such as roads, storm water management, waste management, parks and gardens, immunisation, libraries, community activities, tree planting, pest eradication, etc.
Rates vary by local government councils. Click on the links below to better understand council rates at a state level.
An application fee applies to all foreign investors who want to buy property in Australia unless buying property with an Australian or New Zealand citizen or Australian permanent resident.
The Federal Investment Review Board’s (FIRB) policy is to channel foreign investment into new dwellings or redevelopment, to create additional jobs in the construction industry, help support economic growth, and increase Australia’s housing stock.
Rules and fees apply when applying for approval. To learn more about the FIRB, buyers agency Maker Advisory have an article all about it: Who Needs FIRB Approval to Buy Property in Australia and How do I Get It?
You are not legally required to have home insurance in Australia, however many lawyers and conveyancers recommend you have it.
The risk of damage to the property typically passes from the seller to the buyer as outlined below, according to the state in which the property is located. Of course, this can vary depending on your contract, so it is important to check your contract to see what applies to you.
The buyer is responsible for any damage on settlement:
New South Wales
The buyer is responsible for any damage when contracts are exchanged:
Australian Capital Territory
The buyer is responsible for any damage before settlement – on and after 5pm the next business day contracts are exchanged:
The buyer is responsible for any damage on the date the purchase price is paid or the date they are given possession of the property – whichever comes first:
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