The First Home Buyers Duty Reduction was first introduced in 2011 and applied to all settlements which occurred after 1 July 2011. The reduction amount has varied but has always been based on reducing the stamp duty paid by a percentage. Duty is calculated on a sliding scale, starting at 1.4% for properties valued at $25,000 and rising to 5.5% for those valued at and above $960,000. The reduction, currently 50%, is calculated on the full duty under this sliding scale.
The Premier has now announced a proposed change that from 1 July 2017 First Home Buyers would not pay any duty on a purchase of up to $600,000 with a significant, although as yet unknown, discount on purchases between $600,000 and $750,000. There is no reduction for purchases of over $750,000.
The State Revenue Office has confirmed that subject to the law passing the exemption will apply to Contracts which are entered into after 1 July 2017. This means it will be worth waiting to see if the law is passed if you are in the market for your first home but haven’t found your dream just yet.
Practically, this exemption will result in an increased amount you can spend on the purchase itself. Because duty has to be paid before the property can be registered in your name (and the bank can register their mortgage) this amount comes off the top of any loan amount. Put simply, if the bank is willing to loan you $200,000 and stamp duty will be $10,000, the bank will only give you $190,000 at settlement to pay the Vendor (likely less with bank and Land Victoria fees). If however Stamp duty is reduced to $0, the bank will free up the entire $200,000 (again less those pesky bank and Land Victoria fees) to pay to the Vendor, which is $10,000 less you have to find.