State government sucker punch: Stamp duty saps your deposit

Written by Jeremy Cabral in Finance on January 18, 2013

As stamp duty concessions are being pared back around the country for first home buyers, tax will take a larger chunk out of their deposits. For those starting to save towards a property, you should budget for stamp duty of at least 3.5% of the purchase price of the property.


Stamp duty strain

Stamp duty is a tax payable at the time of purchase for the buyer of a new property. And with house prices such a stretch already, especially for first home buyers, this can be the straw that breaks the camel’s back. What looked like a healthy 20% deposit often doesn’t suffice when stamp duty is taken into consideration. My stamp duty calculations show that you will be paying at least $10,000 in most states for stamp duty on a loan of $300,000. If you are sitting pretty on savings of $60,000 and are in the market for a $300,000 dollar property, you are down to a 17% deposit after stamp duty. This is all before legal costs, inspection costs, transfer fee and loan establishments (approximately $3000+ combined) are taken away from your savings pile. This then takes your Loan-to-Value ratio (LVR) up to 84%, well inside Lenders Mortgage lnsurance (LMI) territory, with an extra cost of around $2000.  LMI can then be paid by the lender and added to the principal of the borrowers’ loan.


How can I pay stamp duty?

Stamp duty needs to be paid at purchase of a property. Many lenders offer the option of paying out stamp duty on your behalf which is then added to the principal of your loan. As a rule of thumb however, this option is only available to you if your LVR is around 85% or less. Say a minimum of a $45,000 dollar deposit on a $300,000 property.

Those going for an 85-95% loan won’t have the option of throwing stamp duty onto the loan and will have to come up with the lump sum upfront.


Stamp duty concession cut back

Most states have cut back on stamp duty concessions for first home buyers. The biggest change has been to move stamp duty concessions to just new dwellings and not existing ones. This is in an attempt to increase the supply of houses of which there tends to be a significant shortage in many parts of Australia.

    • ACT and Queensland are still stamp duty free for first home buyers.
    • For new constructions, NSW is stamp duty free for purchase prices under $600,000 while in Tasmania; stamp duty is paid only on the land and not the building component.


The facts: stamp duty on $300,000 established first home buyer property


Stamp duty payable


  $8,550.  Not including FHB grant of $7,000. (Revenue office calculator)


  $8,990. (Office of State Revenue calculator)


  $0.  FHB grant $12,000-$25,000. (Revenue office)
SA   $11,330. Not including FHB grant $5,000. (Revenue SA)


  $9,935.  Not including FHB grant $7,000. (Department of Treasury and Finance)


  $9,096.  Not including FHB grant $7,000. (State Revenue Office)


  $0. FHB grant $7,000. (Department of Treasury and Finance)


  $0. (Office of State Revenue)


Skewed incentives?

One of the unresolved tensions for me is whether incentives such as the First Home Owners’ Grant and stamp duty, from an economic perspective, heat up demand so much that the value of the incentives are more than tacked onto inflated house prices at the lower end of the market.  What happens to the housing market when the baby boomers start off-loading their property portfolios to fund retirement and healthcare costs? For all the economists out there, email me relevant data and your qualified opinions and I will review the responses in one of my next blogs.


Written by Jeremy Cabral, Publisher of top home loan comparison website,, a free website which aims to help consumers make informed choices when selecting a home loan.