In one of his early moves as the new Premier of Queensland, Campbell Newman reinstated state stamp duty concessions for principal places of residence (your home).
Cabinet formally approved the reinstatement of the principal place of residence stamp duty concession from July 1, 2012, which will save Queenslanders up to $7,000 when they purchase an average family home.
The concession was dropped in June 2011 by then Queensland treasurer Andrew Fraser in a bid to raise an estimated $161 million for the state government.
While this is good news for homebuyers in Queensland, as I said, there are some traps to avoid.
Firstly, what is stamp duty?
Stamp duty is a tax that is levied by the state, not the federal government, on certain documents.
Historically, this included the majority of legal documents such as cheques, receipts, commissions, marriage licences and land transactions.
I remember the old days when a physical stamp (a revenue stamp) had to be attached to the document to denote that stamp duty had been paid before the document was legally effective.
Today, the tax no longer requires an actual stamp to be placed on the document, but obviously the tax must still be paid.
Interestingly, this type of duty was originally introduced in the Netherlands way back in 1624 and subsequently spread to many other countries.
So what is this new concession?
With the reinstatement of the home concession, contracts to purchase a home in Queensland entered into on or after July 1, 2012 by home buyers will be eligible for the transfer duty home concession if they meet the concession conditions.
The home no longer has to be the first home of the homebuyer, and can be a new house or one that has been previously occupied. In other words – it’s not a first home owner’s grant and it’s not a new home owner’s grant.
But the home buyers will need to prove that they are individuals and not trustees, and the residence must be occupied as the principal place of residence within one year of the transfer and the occupation as principal place of residence must continue for at least one year from the time it commences.
Where the concession applies, a concessional transfer duty rate of $1 for each $100 or part of $100 will apply to the first $350,000 of the consideration or value of the home. Duty at the general rates will apply to any remaining part of the consideration.
Putting this into numbers – the average homebuyer will save $7,000 and if you think about it you’d probably have to earn $10,000 or more before tax to have that $7,000, so it’s a substantial savings for the average Queensland homebuyer.
Here are the warnings…
If you plan to buy a property this month don’t make false arrangements in the hope of avoiding stamp duty – the government will be on the look out and is likely to scrutinise all home sale contracts carefully over the next few months.
There are three very important circumstances in which the old duty will still apply:
- If the transfer or agreement replaces a transfer, or an agreement for the transfer, that included the land and was made before July 1, 2012; or
- If the transferee had an option to purchase the land, or the transferor had an option to require the transferee to purchase the land, granted before July 1, 2012 and exercised on or after July 1, 2012; or
- If another arrangement was made before July 1, 2012 the sole purpose or main purpose of which was to defer the making of the transfer or agreement until July 1, 2012 or later so the concession for transfer duty under the relevant provisions, as in force on or after July 1, 2012, would apply in relation to the dutiable transaction.
Buyers should be aware that these provisions are trying to “catch” anyone who comes to an agreement in principle with the seller but tries to delay signing a formal contract until July 1, 2012.
It is likely that any contracts dated July 1 or shortly after that may be scrutinised and “show cause” letters could be sent to the buyers seeking proof that the decision to purchase was actually made on that day and not prior to it.
I wonder if the last few months leading up to June will be quieter ones for home sales in Queensland.
Michael Yardney is the director of Metropole Property Investment Strategists, a best-selling author and one of Australia’s leading experts in wealth creation through property. For more information about Michael visit www.metropole.com.au and www.PropertyUpdate.com.au.