Stamp duty reform for Queensland

When I mention transfer duty (previously stamp duty) to Buyer’s some of the most common questions I receive are:

• What is it?
• Didn’t that get abolished?
• Isn’t the government talking about changing it?
• Can I get a pensioner rebate?

Unfortunately, the answer to the last 3 questions is “No”.

What is Transfer Duty
Transfer Duty is a tax imposed by the State Government (through the Office of State Revenue) on the transfer or agreement to transfer property in Queensland. So, for anyone buying a property in Queensland they will have to pay transfer duty. This tax provides no benefit to the buyer but is a means to increase the state government’s revenue. In 2018-2019 the Queensland State Government collected just over $3billion in transfer duty.

How much is the Transfer Duty in Queensland
There are three levels of transfer duty in Queensland:

• A concessional rate for first home buyers (including vacant land if the buyer intends on building and living in the house) on a purchase price up to $550,000;
• A concessional rate for home buyers (provided they will live in the property; not available for vacant land); and
• The full rate for investors, a company buyer or a trust buyer.

The duty is calculated based on the purchase price (or the value of the property if the Buyer is receiving a discount or rebate).

As an example of some varying scenarios:

• First Home Buyer | Purchase price: $540,000 | Duty payable: Nil
• First Home Buyer | Purchase price: $700,000 | Duty payable: $17,350
• First Home Buyer - Land | Purchase price: $300,000 | Duty payable: Nil
• Home Buyer | Purchase price: $600,000 | Duty payable: $12,850
• Home Buyer | Purchase price: $800,000 | Duty payable: $21,850
• Investment | Purchase price: $600,000 | Duty payable: $20,025

Is reform required?
Transfer Duty can be a significant expense in purchasing a property and in regional areas where property prices are higher can be preventative. A Buyer either must save more money to contribute to the cost of transfer duty or add this cost to their loan and pay interest on the amount over the life of their loan.

An owner still in their first or second house may want to upgrade to a bigger house or a house closer to school or work but find the costs of selling and buying (eg agents commission, legal fees, bank fees, Titles Office fees and Transfer Duty) prohibitive compared to the equity they may have. This means that their smaller house which may be perfect for a young couple with no kids or an older couple is not available. Similarly, an older couple who have lived in their family home for 20+ years may want to downgrade to a smaller house with less maintenance but instead of having to pay transfer duty decide to stay, leaving their bigger home unavailable.

The rates of transfer duty have not been indexed over the years as property prices have increased and with many suburban homes being $600,000.00 or more the amount of transfer duty being paid to the government is increasing every year.

Reform in Queensland
At the moment, there are no plans to reform transfer duty in Queensland, however the Real Estate Institute of Queensland is lobbying the government for change. Some suggestions from the REIQ are:

• Extend the First Home Buyers Grant to established housing (rather than just new construction);
• Reduce the transfer duty rate significantly (75%) in the immediate aftermath of covid-19 followed by a 40% reduction down the track for buyers intending on living in the property;
• Remove transfer duty for buyers over 65+ years;
• Reduce the rate for investment properties where the buyer commits to renting the property for 3 years or more.

Reform in New South Wales & Victoria
New South Wales and Victoria are considering abolishing transfer duty altogether and replacing it with an annual land tax on every home owner. At first glance this suggestion seems like a welcome relief from the high initial costs of purchasing a property; however on deeper investigation it looks like it could end up costing a buyer more over the long run.

It does not seem as though the Buyer would be paying off the transfer duty over time but rather be faced with a land tax bill for every year of their home ownership. At a possible $4,000.00 per annum over 20 years this far outweighs the cost of the transfer duty had they initially paid it. Further, this land tax would be imposed on home owners who have already paid their transfer duty – whether they have owned their property for 1 year or 20 years.

Conclusion
It will be interesting to see whether Victoria and New South Wales proceed with their proposal or whether it is amended to be more favourable to the buyer.

I don’t anticipate the Queensland Government making any changes to transfer duty in the near future – at the moment buyers have no choice but to pay and it is increasing their revenue in the post-covid period where their revenue may be diminished. But I do advocate the REIQ’s proposals of reducing the rates given the increase of property prices over the years.
 
Meagan Davies is a property and conveyancing lawyer with over 14 years experience. This is general advice only and the rates of transfer duty and concessions available will depend on your circumstances. Please contact our office if you would like to discuss the transfer duty applicable to your purchase.