Updated: April 2023
Stamp Duty on Investment Properties can become vey costly. Yet you may claim it as a deduction
Is Stamp Duty Tax Deductible in Australia?
If you want to buy property in Australia you have to play (or pay) the game.
Stamp duty is one of those forgotten costs in buying a house… until you go for a loan. And when you’re a property investor the Stamp Duty is even higher than duty on a principal place of residence.
Here’s everything you need to know about stamp duty in Australia and if stamp duty is a tax deduction.
Firstly;
What is Stamp Duty on Investment Properties
Stamp Duty is a State administered tax on the sale of a property.
As such, the States tend to have different rules and nuances you must work with. But one thing is for certain… there’s no avoiding the stamp duty tax.
The stamp duty (transfer duty) tax is paid by the buyer, not the seller and is typically due payable within 30-days of settlement.
Having said that… in NSW the due date is as much as 90-days after settlement. Making life a little easier for the investment property buyer.
How Much Stamp Duty Do You Pay?
Stamp Duty is not a fixed fee. Rather, it works more like a real estate agent’s commission.
The more you pay for your property, the higher the stamp duty.
Plus, there are two different rates of duty to think about.
- Investment Property stamp duty rates and…
- Principal Place of Residence stamp duty rates
Principal place of residence buyers get a stamp duty ‘concession’ or in other words, investment property buyers get charged even more transfer duty.
The best way to find out how much duty you’ll be hit with try using a free online stamp duty calculator.
Stamp Duty Calculator
There must be hundreds if not thousands of stamp duty calculators on Australian websites. But this one here is my pick of them all. It’s fast. Easy. And accurate.
Is Stamp Duty Tax Deductible?
Unfortunately not.
I wish it was true, but you cannot claim the upfront costs incurred by a Stamp Duty event as a tax deduction in your tax return.
But…
There is some relief for you
Eventually…
You see, you can claim stamp duty as a holding cost or capital loss when you sell your property. Aka in the accounting world as a capital gains tax event.
That’s because the Australian Tax Office (ATO) sees stamp duty as a capital cost and is added onto the cost base of your purchase price.
So when you sell your property you don’t pay CGT on the stamp duty portion
Here’s an example for you:
Let’s say you purchase a new investment property for $600,000
Now, your property is in Brisbane, so the Queensland stamp duty laws apply.
That means the stamp duty payable to the state government is $20,025.
Now let’s say you sell the property for $700,000 4-years later.
Instead of paying CGT on the $100,000 profit, you pay the CGT based on this simple calculation:
$700,000
-$600,000
-$20,025
Total profit subject to CGT = $79,975
I’ve not touched on other non-deductible purchase costs here, but there are further CGT reductions on offer.
For example:
- Conveyancing fees at time of purchase
Just like stamp duty, you can’t claim the tax deductions for conveyancing fees until you sell your investment property and mark off the expense (as a loss) against any Capital Gains.
- Agent sale fees
Again, just like stamp duty and conveyancing costs, you can only receive the tax relief benefit from this cost once you sell your property.
Is stamp duty deductible in income tax?
In Australia, stamp duty is not generally tax deductible for individuals. However, in some cases, stamp duty on an investment property may be tax deductible as a cost of acquiring the property, which can reduce the capital gains tax liability when the property is sold. This can vary depending on the individual’s circumstances, so it’s always best to consult a tax professional or accountant for specific advice.
Is stamp duty a tax deduction
Stamp duty is a tax dedcutions, but only at the the time of a Capital Gains Tax event. Like when you sell your property. If the ATO says yuo have CGT to pay, the Stamp Duty you paid at time of purchase can be used as a tax dedcution against any CGT payable.
Which Property is Exempt From Stamp Duty
As we are talking only about investment properties in this article, the only property that I can think of that’s Stamp Duty exempt, is investment properties purchased in the Australian Capital Territory (ACT) on a 99-year lease agreement. But like all investment rental properties, you do have to be producing income from the property.
To Recap
Other than investing in the ACT, there’s no way to avoid Stamp Duty in Australia. You should therefore always factor in the additional costs of stamp duty when making an offer on a new property.
If you’ve still got questions feel free to contact me for further clarification.
You can also find a lot more helpful info about your potential tax savings by checking out our main page.
But:
If you found this helpful, you may also find some of my other articles beneficial too. And to see some real life examples of what our clients have been receiving in tax depreciation deductions, check out our Client Portfolio page.
This article was written by William Callaghan A.A.I.Q.S.
2nd generation Quantity Surveyor and founder of WRC Quantity Surveying
