First Home Buyers in Victoria: Costs, Grants and Stamp Duty

Buying your first home is exciting, but the purchase price and deposit are not the only amounts that need to be considered.

Understanding the likely costs, and the assistance that may be available, can help you prepare a realistic budget before signing a Contract of Sale.

What costs should first home buyers budget for?

The costs associated with buying a home may include:

• the deposit;

• land transfer duty, commonly called stamp duty;

• conveyancing, search and settlement costs;

• building and pest inspections;

• lender application, valuation or mortgage costs;

• lenders mortgage insurance, if applicable;

• adjustments for council rates, water charges and owners corporation fees;

• home and contents insurance; and

• moving and connection costs.

Some costs are payable before settlement, while others are included in the funds required to complete the purchase.

Is the deposit an additional cost?

The deposit forms part of the purchase price - it is not an additional amount on top of it.

For example, if you purchase a property for $650,000 and pay a $65,000 deposit, the remaining balance of the purchase price is $585,000.

The amount of the contractual deposit is separate from the deposit your lender requires when assessing your loan. You should confirm the proposed deposit and payment timing with your lender or broker before signing the Contract.

What is land transfer duty?

Land transfer duty is a Victorian government charge that ordinarily applies when property is purchased.

The amount depends on matters including the property’s dutiable value, how it will be used and whether the purchaser qualifies for an exemption or concession.

Dutiable value is generally the greater of the purchase price or the property’s market value.

What stamp duty assistance is available to first home buyers?

At the time of writing, eligible first home buyers purchasing a Victorian home with a dutiable value:

• up to $600,000 pay no land transfer duty; and

• from $600,001 to $750,000 receive a reduced rate of duty.

Once the dutiable value exceeds $750,000, the first home buyer exemption or concession does not apply.

The exemption or concession can apply to an eligible new or established home or vacant land on which the purchaser intends to build their first home.

Who may qualify for the first home buyer duty concession?

The eligibility rules consider all purchasers and their spouses or domestic partners.

Among other requirements, the purchasers must generally:

• be natural persons rather than companies or trusts;

• be at least 18 years old;

• be Australian citizens or permanent residents;

• purchase the property at market value; and

• intend to use it as their principal place of residence.

Previous property ownership, occupation of an earlier property and any First Home Owner Grant previously received can affect eligibility.

At least one purchaser must ordinarily move into the home within 12 months of settlement and live there as their principal place of residence for 12 continuous months.

What is the First Home Owner Grant?

The First Home Owner Grant is different from the stamp duty exemption or concession.

At the time of writing, the Victorian grant is $10,000 for eligible first home buyers purchasing or building a new home valued at up to $750,000.

The home must generally be new and must not have been previously sold or occupied as a residence. The grant is not ordinarily available when purchasing an established home.

The applicant and their spouse or partner must satisfy the eligibility requirements, even if the spouse or partner will not be registered as an owner.

Can you receive both the grant and a duty concession?

An eligible first home buyer purchasing a qualifying new home may be entitled to both:

• the First Home Owner Grant; and

• the first home buyer duty exemption or concession.

They are separate forms of assistance with different requirements. A purchaser of an established home may qualify for the duty exemption or concession but will not ordinarily qualify for the First Home Owner Grant.

What about off-the-plan property?

A person buying a property off the plan may also qualify for an off-the-plan duty concession in some circumstances.

This concession may reduce the dutiable value by deducting eligible construction costs incurred after the contract date. The eligibility criteria and calculation can be complex and may depend on the type of development and when the contract is signed.

The First Home Owner Grant threshold is assessed differently, so qualifying for an off-the-plan duty concession does not necessarily mean the purchase qualifies for the grant.

What are settlement adjustments?

At settlement, certain property expenses are adjusted between the vendor and purchaser.

These may include council rates, water charges and owners corporation fees. Adjustments ensure each party is responsible for the relevant portion of the expense.

Depending on when an account was paid and the settlement date, an adjustment may increase or reduce the amount needed to complete settlement.

What other expenses are commonly overlooked?

First home buyers should also allow for expenses such as:

• an independent building and pest inspection;

• immediate repairs or maintenance;

• insurance commencing from the appropriate date;

• owners corporation fees and possible special levies;

• utility connections;

• removalists; and

• loan repayments beginning shortly after settlement.

It is sensible to retain a financial buffer rather than using every available dollar for the deposit and settlement.

Why should the Contract be reviewed before signing?

A Contract of Sale is legally binding once signed subject to any cooling-off rights or conditions included in the Contract.

Before signing, you should confirm that the Contract contains any required finance or building and pest inspection conditions and that the proposed settlement date is achievable.

The Section 32 statement should also be reviewed so that you understand the title, planning information, services, outgoings and any owners corporation affecting the property.

How I can assist

I can review the Contract of Sale and Section 32 statement before you sign, explain the conveyancing process and identify the information relevant to your proposed purchase.

Once the Contract is signed, I can assist with the duty concession documents, electronic settlement and transfer of the property into your name.

This information is general in nature and does not constitute legal, financial or taxation advice. First home buyer grants, concessions, thresholds and eligibility requirements may change, and advice should be obtained for your individual circumstances before signing a Contract of Sale.