It’s important to understand the tax you pay when you buy a property, your obligations as an owner, and the benefits available to help you
Before you buy a property, there are some essential facts you need to know:
1. You pay duty on your purchase
When you buy or acquire a property, you'll most likely have to pay land transfer duty (commonly called stamp duty). The amount of duty you pay depends on the value of your property, whether you are eligible for any exemptions or concessions, and if you are a foreign purchaser.
2. We need to know you're the owner
It's important that we know that you're the new owner so that we can update our land ownership records. We may also need to know if your property is in a congestion levy area or is on Melbourne's fringe. You should also be aware that as an ongoing owner, you may have to pay other taxes and levies. For example, from 1 January 2016, an absentee owner surcharge on land tax applies to Victorian land owned by an absentee owner.
3. There are exemptions and concessions
You may be eligible for exemptions and concessions from land transfer duty for your property. If you are buying a property as your first home, you may be eligible for further assistance.
Please refer to our comprehensive comparison table to understand the differences between our most common grants and concessions/benefits when buying a property.
4. Outstanding land tax may affect your purchase
Any land tax outstanding on the land must be paid before you can become the new owner of your property.
Calculating and paying duty
The rate of duty depends on the value of your property, starting at 1.4 per cent and rising to 5.5 per cent. If you are a foreign purchaser, you will pay an additional duty amount of 3 per cent, which the Victorian Government has announced will increase to 7 per cent from 1 July 2016.
Duty is charged based on the higher of:
- The price you paid for the property, or
- The price for which it may be reasonably sold on the open market
You must pay duty within 30 days of the property being transferred, which is generally the date of settlement. If you don’t pay duty within this time, penalty tax and interest may apply.
When you buy your property, your conveyancer/solicitor or bank will normally organise and pay duty on your behalf. To confirm that duty has been paid, ask them for a duty statement.
Regular lodgers involved in the property conveyancing industry should apply to become a Duties Online registered user.
Members of the public who are not using a DOL registered user (usually a solicitor or conveyancer) and wish to lodge electronically as an individual can do so after a simple registration process. You can electronically lodge scanned documents for a land transfer of declaration of trust via our website after you register with us.
Land tax is the first charge on the title to the land to which it relates, and must be paid before ownership can change.
If you are buying a property, you can apply for a land tax clearance certificate to see whether any land tax is owed and, if so, how much. You can then arrange for the outstanding tax to be paid before you become the new owner.
You can apply online and pay the application fee ($15.80) securely by credit card. The fee for the 2016-17 financial year is $16.20.
Note: all certificates are subject to a number of notes which you should read carefully.
If you frequently apply for land tax clearance certificates, you should become a registered LTX Express Clearance Certificates user.
The benefits of becoming a registered user are that you can create, save and manage multiple certificate applications and update requests with secure encrypted payment available by Visa, MasterCard or monthly direct debit.
Exemptions, concessions and the FHOG
You may be eligible for the First Home Owner Grant (FHOG), and one or more duty exemptions and concessions, when you buy property in Victoria. These include, but are not limited to:
- FHOG – a one-off grant of $10,000 for new first homes valued up to $750,000
- First-home buyer duty reduction – a one-off duty reduction for a PPR valued up to $600,000
- Off-the-plan concession – a duty concession for an off-the-plan property, either as a land and building package, or as a refurbished lot
- Pensioner concession – a one-off duty exemption or concession for a new or established home valued up to $750,000
- Principal place of residence (PPR) concession – a duty concession for when a property you buy, valued up to $550,000, is intended as your primary home
- Young farmer’s exemption/concession – a one-off duty exemption or concession for young farmers buying their first farmland property
You may be eligible for more than one of these exemptions or concessions. You should discuss these with your conveyancer and/or representative before settlement.
Importantly, you should complete all relevant forms before settlement and advise your conveyancer, solicitor and bank so that the right exemption or concession can be claimed on your behalf, and you pay the correct amount of duty on settlement. Otherwise you may pay more than you need to, and will have to apply for a refund.
Note: most exemptions and concessions can be processed through Duties Online, which means you won't have to apply for refund.
The timing of any exemption and concession depends on the contract you sign to buy/build your new home. The timing of your FHOG depends on whether you lodge your application directly with us or via an approved agent.
What is your PPR?
If you own, either by yourself or with someone else, the home you live in, this is called your principal place of residence (PPR).
To satisfy some eligibility requirements for concessions and/or benefits available to homebuyers, you must live in your property as your PPR for at least a year. Additionally, you must start to live in the property within 12 months of settlement or completion of construction.
We can extend the start of your 12-month period, but you must request this in writing.
It's easy to let us that you're the new owner of land. You must complete and lodge a notice of aquisition with the Land Registry. Your conveyancer/solicitor usually does this on your behalf when they register your title to the property, but we recommend you check that it has been done correctly.
The notice of acquisition must be lodged within one month of your settlement. Then, the Land Registry will tell us you're the new owner.
Note: it is very important that you confirm in your acquisition notice if your new property will be your PPR.
Your new property is your PPR
If you intend to live in your new property as your PPR, state this in the notice of acquisition. This is because your home is exempt from land tax.
Your new property is not your PPR
If your property is not your PPR and no other exemption applies, you will likely have to pay annual land tax.
If you hold the land as a trustee for a trust, you must notify us of this trust acquisition of an interest in land within one month of settlement. Land held on trust may be subject to higher rates but in certain circumstances, a concession and/or exemption may apply.
Please note, there are obligations you must meet as the ongoing owner of a property in Victoria.
If you are buying a new first home, buying an existing property that is for sale as a residential premises for the first time, or are building a first home, you may be eligible to one or more of the following:
- The FHOG of $10,000 (for homes valued at $750,000 or less),
- A first-home buyer duty reduction of up to 50 per cent (for homes valued at $600,000 or less),
- A PPR concession (for homes valued at $550,000 or less), and
- An off-the-plan concession
A new home can be a house, townhouse, apartment, unit or similar, but must be a property that is being sold for the first time as a residential premises.
Established homes are no longer eligible to receive the FHOG. However, if you are buying an established home as your first home and you meet the FHOG eligibility criteria (but for the fact that it is not a new home), you may be entitled to:
- First-home buyer duty concession of up to 50 per cent (for homes valued at $600,000 or less), and/or
- PPR concession (for homes valued at $550,000 or less)
A one-off pensioner concession/exemption is available for homes valued up to $750,000 that you use as your PPR. This assistance is offered to all eligible pensioners, including those who are first-home buyers.
Eligible pensioners who qualify for the FHOG must elect to receive either the duty reduction of up to 50 per cent or the one-off pensioner concession/exemption, whichever you calculate is worth more.
- The 50 per cent duty reduction applies to homes valued up to $600,000, and
- The pensioner concession/exemption for homes up to $750,000. The full exemption applies for homes valued up to $330,000
Where there are eligible joint owners, such as spouses, the pensioner concession/exemption is applied to the fractional interest of each owner.
An off-the-plan concession is available to eligible buyers of a land and building package, or a refurbished lot. You do not have to intend to live in the property to receive this concession.
The concession deducts, from the contract price, the cost of construction or refurbishment which occurs on or after the contract date. This means you pay duty only on the:
- Improved value of the land,
- Non-deductible costs, and
- Completed construction/refurbishment (including GST)
The vendor generally applies for the off-the-plan concession via our application form, where you will find instructions to help you calculate an estimated concession amount.
Eligible farmers aged below 35 may receive assistance when buying their first single parcel of farmland, as follows:
- A full exemption from duty on farmland valued at no more than $300,000,
- A partial exemption from duty on farmland valued at no more than $600,000. This is calculated by subtracting the duty payable on $300,000 from the duty payable on the value of the farmland (of $600,0000 or less), or
- A concession from duty for farmland valued between $600,000 and $750,000
You must choose between this exemption/concession or the PPR concession, whichever you calculate is worth more to you.
Complete our application form if you wish to claim the young farmers duty/concession for buying a farm. You may be eligible even if you have previously owned non-farmland.
Investment properties and holiday homes
As with buying a home to live in, once you own the property (investment or holiday home), you may have to pay other taxes or levies.
You do not need to do anything if you buy a residential property with parking space/s in the congestion levy area, and:
- While you live in the property, only you will use the parking space/s to park your car, and
- The parking space/s is only for a resident to park their car
You have to register with us if a parking space on a residential property is used for a non-residential purpose and is not exempt from the levy, for example, it is leased to another person.
You also need to register with us within one month of settlement if you buy a property in the congestion levy area that is:
- Public or private car park, or
- Non-residential property on which leviable parking spaces are located
You do not need to do anything if you have bought a property in a GAIC contribution area that:
- Has a total title area of 0.41 hectares (4100 sq m) or less, and
- Does not have a GAIC recording against its title
If there is a GAIC recording against the title to the property, you will be liable to pay the GAIC unless an excluded event or exemption applies.
Your obligations and responsibilities
You must always provide us with true and accurate information. If we find you provided false or misleading statements on any application or do not meet the residency requirements, you will be ordered to repay the grant and/or any duty amounts. You may also face penalties.
If you believe that you overpaid duty when you bought your home because, for example, you were eligible but didn’t claim an available benefit, you may apply for a duty reassessment. If we find that you are eligible, we will refund the overpaid duty.
To apply for a reassessment, you should send us a cover letter along with the completed application forms for the relevant exemption, concession or reduction/s and any supporting documents.
Your request must be made within five years of your payment of the duty.
Please note the amount of your refund depends on a number of factors, including the settlement date and the value of your property at that time. We receive large volumes of refund applications so please be aware that your case may take up to 60 days to process.
Getting it right
Our priority is to help you pay the right amount of tax at the right time. Learn more about how we'll do this.