KEY TAKE-OUTS
- Stamp duty is actually now called ‘transfer duty’
- When do I have to pay stamp duty?
Ahh stamp duty, you know it well whether you’ve paid it several times before or are about to for the first time. It’s a significant factor in one’s decision to purchase a property.
Before we get into when it’s payable, we should clarify something… it’s actually now called ‘transfer duty’. It has been for a while, but old habits die hard as they say and ‘stamp duty’ has stuck. Nevertheless, where you see ‘transfer duty’ it is referring to the old ‘stamp duty’. They are one and the same. This is important to consider when researching online and trying to get your head around all the legal jargon and terms we use in conveyancing.
So, when do you have to pay transfer duty?
Transfer duty is due on or before the earlier of:
- Settlement; and
- 3 months after the Contract date.
The earlier of, means whichever occurs first.
As such, if you’ve entered into a Contract to purchase a property with a standard 42-day completion period, you must pay the transfer duty on or before settlement.
If you have entered into a Contract where the completion period is longer than 3 months or you’ve purchased unregistered land and the land doesn’t register and settle within 3 months of the Contract date, transfer duty is due within 3 months of the Contract date. The Contract date is the date Contracts were entered into and appears on the first page of the Contract for Sale document.
The exception to this is where you have purchased a residential property off-the-plan and it is your intention to use that property as your principal place of residence. In this instance, you may be eligible for a deferral of the payment of transfer duty. Where you are eligible, transfer duty for the purchase of an owner-occupied off-the-plan property is due on or before the earlier of:
- Settlement; and
- 15 months after the Contract date (that’s an extra 12 months in addition to the usual 3 months).
So, what is off-the-plan? Purchasing off-the-plan is where you enter into a Contract to buy a property before or during its construction and settlement falls due once the construction of the property has been completed.
So what happens if you don’t have the funds to pay the transfer duty until settlement but it’s due beforehand?
The amount due will accrue interest until it is paid. Revenue NSW has a calculator on their website which can be used to determine how much interest would be payable in this instance.
Here are some ‘real-life scenarios’ to help you better understand and get your head around how the above information applies practically.
Scenario 1
On 3 January 2022, Sally and Harry entered into a Contract to purchase a unit in Campbelltown. The Contract states that the completion period is 35 days after the Contract date, being 7 February 2022. When must the transfer duty be paid?
If you answered on or before settlement, 7 February 2022, you are correct.
Scenario 2
On 24 January 2022, Susan and Carol entered into a Contract to purchase a house in Bradbury. The Vendors are moving interstate so the Contract has a 6 month completion period on it, to allow them time to travel back and forth and find something else to buy. Susan and Carol are happy with the extended completion period because they are living with Carol’s parents, so they aren’t in a rush to move in. When do Karen and Sarah need to pay transfer duty by?
The answer is 24 April 2022, being 3 months after the Contract date.
Scenario 3
On 24 January 2022, Jack and Jill entered into a Contract to purchase a brand new home. The home is not yet built. It’s under construction and isn’t due to be completed until the end of December 2022. They are very excited because they plan on moving straight in and making it their family home. If the house is completed when they anticipate, at the end of December 2022, can they pay the transfer duty at settlement? If you answered yes, you are correct. Jack and Jill’s purchase qualifies for the off-the-plan deferral of duty. If the house is completed in December 2022, that’s just 11 months after the Contract date. But, what happens if the construction is substantially delayed and the house isn’t completed until October 2023 meaning settlement doesn’t occur until October 2023? In this instance, transfer duty would need to be paid on or before 24 April 2023 (being 15 months after the Contract date), or else it would accrue interest until it’s paid.
Scenario 4
On 20 December 2021, Sam entered into a Contract to purchase an unregistered block of land. The land is anticipated to be registered in 3 years. When is transfer duty due?
By 20 March 2022, being 3 months after the Contract date. Given the purchase of unregistered land doesn’t qualify as ‘off the plan’ and given the land is not due to be registered for over 3 months, transfer duty falls due within 3 months of the Contract date.
ABOUT MELINA COSTANTINO
Melina has over 9 years of experience as a Licensed Conveyancer, acting for client matters involving; purchase and sale of residential and commercial property, Retirement Village Contracts, Put & Call Options, Call Options, and Family Transfers. She is passionate about helping a wide range of clients across all aspects of the buying and selling process and ensuring that her clients meet all their legal obligations.
For further information please don’t hesitate to contact:
Melina Costantino
Licensed Conveyancer & JP
info@couttslegal.com.au
1300 268 887
This blog is merely general and non-specific information on the subject matter and is not and should not be considered or relied on as legal advice. Coutts is not responsible for any cost, expense, loss or liability whatsoever in relation to this blog, including all or any reliance on this blog or use or application of this blog by you.
