The State Budget was a big-spending affair and homebuyers didn’t miss out, with off-the-plan purchasers set to save. Meanwhile, stamp duty on homes bought for more than $2 million will increase. So, how will these changes, starting on July 1, effect your purchase? Let’s look at the numbers.
New premium stamp duty rate
The Government has upped the stamp duty on homes sold for more than $2 million by one per cent, increasing from 5.5% to a new rate of 6.5%. Many homes in the eastern suburbs, including Balwyn ($2,581,500), Camberwell ($2,435,000) and Glen Iris ($2,280,000), have a higher suburb median price. If you are looking to spend more than $2 million, you would have done well to lock in a quick sale before July 1 when the stamp duty rate changed. For example with the new stamp duty rate a $2.5 million home in Hawthorn will accrue tax of $142,500, adding an extra $5,000. While it’s small change in the scheme of things, it’s still money out of your pocket and a consideration when making a big ticket purchase. Meanwhile, suburbs with lower median prices, such as Box Hill ($1,570,00) Ringwood ($1,025,000) and Croydon ($860,888) all fall below this new tax threshold. (REIV March Quarter Median Price results shown).
Savings on off-the-plan abodes
The concession for off-the-plan purchases has been widened, giving buyers in this rising market a small leg up. Off-the-plan purchases worth up to $1 million will be eligible for the dutiable concession (tax is only calculated on the contract price minus the construction costs incurred on or after the contract date). Previously, the cap was $750,000 for first-homebuyers or $550,000 for all others. Now, these savings are evenly spread.
City of Melbourne savings on unsold new properties
To give the inner-city residential economy a boost, there will be temporary stamp duty exemptions and concessions for properties within the City of Melbourne local government area, which includes the CBD, Docklands, Carlton and South Yarra. New properties, which haven’t been sold more than a year after completion, with a dutiable value of up to $1 million, will get 100% stamp duty exemption. Properties which have been on the market for less than 12 months are eligible for a 50% stamp duty exemption.
With Melbourne’s median house price now $1 million, buyers should consider the small but not insignificant savings and extra taxes which come into effect on July 1. After all, a penny saved is a penny earned.