Do I need to pay stamp duty when building a house?

Are you tossing up between buying an existing property or building from scratch? There’s no denying that these are two completely different approaches to homeownership, but did you know that buying and new builds can also have a huge impact on the amount of stamp duty you need to pay?

Read on to learn more about how stamp duty applies when you’re building a home.

What is stamp duty?

Stamp duty, also known as transfer duty, is a type of tax that state and territory governments charge on the purchase or transfer of almost any real estate. It applies to buying a home, purchasing land and buying an investment property.

Besides your home deposit, stamp duty is one of the largest upfront costs that comes with buying a property or land. Because of this, it often catches home buyers off guard when the time comes to settle up.

The amount of stamp duty you’ll be up for depends on several key factors, including:

• The state or territory where your property is built
• The price of your property
• Whether or not you’re entitled to any exemptions or concessions

Check out our blog on things to know about stamp duty when buying a house for a state-by-state breakdown of how stamp duty works.

Who pays for stamp duty?

Regardless of which state or territory you’re buying in, the purchaser is always responsible for covering the cost of stamp duty, not the seller. That said, many states offer concessions or exemptions for first home buyers, which can reduce the amount of stamp duty payable or eliminate it altogether if certain conditions are met. Stamp duty thresholds often apply, so if you purchase a home that exceeds this limit as a first time buyer, you could still be up for stamp duty.

But how exactly does stamp duty on new builds work? Let’s take a closer look.

Do you pay stamp duty when building a house?

When it comes to building a house, stamp duty doesn’t apply to the construction of a new home. With that said, if you need to buy a vacant block of land to build on, you’ll need to pay stamp duty on the land component of the purchase.

How do house and land packages work?

Rather than managing a build themselves, many people choose to purchase a house and land package. In these instances, stamp duty is typically only payable on the land component, not on the construction of the house.

A house and land package is considered an off-the-plan purchase, so you’ll often be able to take advantage of off-the-plan stamp duty concessions. However, the specifics depend on when you sign the contract and when the construction is completed.

Stamp duty is usually calculated based on the value of the property at the time the contract is signed, not when the property is completed. With this in mind, if you sign a contract to buy a house and land package before construction starts, you’ll only pay stamp duty on the land portion of the package. However, if you sign a contract of sale and construction has started, you’ll pay stamp duty on the value of the property at the time of transfer or the date you signed the contract. While you wouldn’t be paying the same amount of stamp duty as you would if the build was completed, you’ll still need to pay a small portion of stamp duty on the property.

Stamp duty requirements and concessions vary across the states and territories, so be sure to familiarise yourself with the local regulations so you don’t get caught out. Refer to the respective state or territory sites below for more information and updates about exemptions and concessions:

• NSW - Revenue NSW
• VIC - State Revenue Office VIC
• QLD - Queensland Government
• ACT - ACT Revenue Office
• SA - Revenue SA
• WA - WA Department of Finance
• NT - NT Gov
• TAS - State Revenue Office of Tasmania

Other concessions for first-home builders

The Home Guarantee Scheme (HGS) is an Australian Government initiative to help you buy or build your home sooner. Housing Australia manages the scheme on behalf of the Australian Government. As a first-time homeowner building your home, you may be able to take advantage of the HGS and stamp duty concessions so long as you meet eligibility requirements.

This Scheme covers three different guarantees, including:‍

• ‍First Home Guarantee‍
• Regional First Home Buyer Guarantee
• Family Home Guarantee

Under the HGS, home buyers can buy several different types of properties, including:

• An existing house, townhouse or apartment
• A house and land package
• Land and a separate contract to build a home
• An off-the-plan apartment or townhouse.

Property price caps set by government legislation are applicable to eligible properties purchased under the HGS. They tend to vary according to the financial year and where the property is located (in a capital city, large regional centre or regional area). You can use the Property Price Cap Tool to look up the property price caps based on your location.

It’s also worth noting that specific timeframes and criteria apply to different property types. The contract of sale and (if applicable) eligible building contract may need to be executed by specific dates in order to qualify for the HGS.

Still trying to decide between buying an existing house or building? Read our blog on should I build a new home, or buy an existing home to learn more.

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Please note, Unloan does not offer construction loans including off the plan purchases at this stage. Unloan does not participate in the Home Guarantee Scheme, Victorian Homebuyer Fund or other government home-buyer assistance schemes. If you are eligible for the First Home Buyer Grant, these funds cannot contribute to your 20% deposit. Please speak to your conveyancer on how best to approach this.

This content has been created for educational purposes only. Unloan may not provide all features discussed. Visit our product page here to learn more about our home loan features.  

This article is intended to provide general information only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. Please consider seeking financial advice before making any decision based on this information.‍

Unloan is a division of Commonwealth Bank of Australia.

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