Transaction & duties
Transaction costs and government duties are mandatory fees and taxes imposed on property transactions and ownership.
Transaction costs
Transaction costs are fees associated with buying and selling property. These include brokerage fees, agent commissions, legal fees, and other costs that occur during property transactions.
Stamp duty
Stamp duty is a one-time tax paid when purchasing a dutiable asset (land, cars, some licenses) unless exempt. It's calculated as a percentage of the purchase price or market value of the asset. The percentage varies by asset and by state, but it's generally in the 3 - 5% range.
Shares and units are generally exempt unless the entity owns significant land - in which case it is classed as transferring property. This is why even corporate title apartments still attract stamp duty.
Stamp Duty Rates (NSW Example)
| Property Value | Stamp Duty | Effective Rate |
|---|---|---|
| $500,000 | $17,990 | 3.6% |
| $750,000 | $29,240 | 3.9% |
| $1,000,000 | $40,490 | 4.0% |
| $1,500,000 | $67,490 | 4.5% |
Land Tax
Land tax is an annual tax on the combined unimproved value of all land you own. It's calculated by state governments and varies significantly between states. You can look up any property's land value on the NSW government portal.
Key points about land tax:
- Primary place of residence is exempt from land tax
- Calculated on the unimproved value of land (not the building)
- Paid annually by property owners
- Different rates and thresholds apply in each state
- For foreign owners and trusts there is a surcharge of 2% on the land tax called Super Land Tax. You can avoid this in trusts by making an irrevocable term in the deed to exclude all foreign persons from being beneficiaries.
- The tax free threshold is only available to individuals, companies and trusts pay the full rate.
In NSW if a property is jointly owned land tax is calculated as if there is one owner with one tax free threshold first and is required to be paid. Then separately each individual has their land tax calculated on all the jointly and individually owned land. You get a credit for the amount paid, but it is not refundable meaning if you only own joint land you may be losing out on half your tax free threshold.
The above reasons are why property is not an investment you find in an index fund where 3.6% of the value is paid in land tax each year. It's more economical to invest in it personally.
Buy property in multiple people's names to take advantage of multiple thresholds. Each person gets their own land tax threshold.
Buy in multiple states to access multiple thresholds.
Land Tax Rates by State (2024)
| State | Threshold | Rate |
|---|---|---|
| New South Wales | $1,075,000 | $100 + 1.6% |
| Victoria | $300,000 | $275 + 0.5% |
| Queensland | $1,000,000 | $500 + 1.7% |
| South Australia | $500,000 | $0 + 0.5% |
| Western Australia | $300,000 | $300 + 0.25% |
FAQ
Yes, each entity gets its own land tax threshold. However, you need to ensure the entities are genuinely separate and not just tax avoidance schemes.
Yes, stamp duty applies to all property purchases regardless of whether it's your home or an investment property. Stamp duty does form part of the cost base for capital gains tax purposes.
Land tax on investment properties is generally deductible as a holding cost. Land tax on your home is not deductible.
Land tax rates and thresholds are reviewed annually by state governments. Changes are typically announced in state budgets and apply from the following financial year.