What is a Stamp Duty Valuation?

What Is Stamp Duty?

Stamp duty is one of the most significant expenses you’ll pay when acquiring a property. Yet, so many investors are hit with a nasty surprise when they realise how much stamp duty they have to pay. 

So, before delving into when it may be necessary to obtain stamp duty valuations, you’ll need to have an understanding of stamp duty and when it’s payable. 

Stamp duty is a form of tax levied by the government for the transfer of the property from the seller to the buyer. 

The amount you’ll be liable to pay is dependent on: 

• the state or territory you reside in; 
• the property’s market assessment value (or purchase price); 
• whether you’re a first-time home-buyer or not; and 
• whether your property is your main residence or an investment. 

The table below indicates the NSW transfer duty rates as of  1 July 2020 :

Stamp duty fees are fully outlined in each state or territory’s revenue office:

• QLD
• Victoria 
• Tasmania 
• Western Australia
• South Australia 

To find out more about stamp duty fees, check out our article where we address whether stamp duty is a tax-deductible expense or not.

Is Stamp Duty Paid on Market Value or Purchase Price?

The amount of stamp duty you’ll be liable to pay is typically based on the value of the property mentioned in the contract of sale. 

Depending on the circumstances, the value will either be the purchase price or stamp duty valuation amount. 

What Are Stamp Duty Valuations?

Stamp duty valuations aren’t compulsory in every circumstance where stamp duty is payable. 

Typically, the Office of State Revenue will accept an assessment of the stamp duty payable based on the selling price that appears in the contract of sale. 

The Office of State Revenue collects various taxes, administers grants and recovers debts on behalf of the residents of the particular state, including: 

• taxes; 
• fines; 
• fees; 
• duties (such as stamp duty); and
• levies and royalties.

But suppose the sale of the property isn’t conducted between unrelated parties (in other words, in an open market) and is negotiated between related parties. If that is the case, the Office of State Revenue will need to ensure that the amount of stamp duty being paid is in accordance with the property’s fair market value. 

It’s worth noting that stamp duty is payable regardless of whether the transfer affects a monetary transaction. 

In other words, there doesn’t need to be an exchange of money between the parties for stamp duty to be payable. 

A common example of where monetary value isn’t exchanged in a transfer of ownership would be when a property is transferred into a trust. 

Stamp duty valuations will generally be required by the Office of the State Revenue in the following circumstances: 

• where the property is being transferred between related parties, for example, mother and son; 
• where the property is being transferred into a superannuation fund; or 
• where the property is being transferred between trusts or other associated legal entities. 

In each of the circumstances mentioned above, stamp duty valuations need to be completed by a certified and experienced Property Valuer. 

How Do Property Valuers Conduct Stamp Duty Valuations?

When conducting stamp duty valuations, the Property Valuer must provide fair market value calculations for stamp duty based on the: 

• type of property concerned; 
• size and build of the property; 
• location; and 
• surrounding amenities such as nearby schools, public transport and shopping. 

Once the property attributes are considered, the Property Valuer will generally consider the recent sale of similar properties to gauge an indication of a similar market value. 

After receiving your stamp duty valuation report, it must be submitted to the Office of the State Revenue, who will determine the amount of stamp duty payable. 

The amount of stamp duty payable will be in accordance with the fair market value of the property, as established in the stamp duty valuation and concerning the relevant state and territory thresholds. 

Are Property Valuations Accurate?

Property valuation is a crucial aspect of various different property transactions, including stamp duty valuations.

But how accurate can you expect your stamp duty valuations to be?

Since Property Valuers are legally liable for the valuation they provide, they are expected to apply due diligence in their valuation and provide information that is as accurate as possible. 

To do this, Property Valuers conduct thorough research with regards to: 

• the surrounding area; 
• the condition of the property; 
• the sale of similar properties; and 
• current market statistics. 

While real estate appraisals can help establish an estimated selling price, the report is not a legal document and doesn’t provide the depth of information you would obtain in a property valuation conducted by a Property Valuer. 

Key Takeaways

The purpose of property valuations is to identify the approximate value that the market proposes your property is worth at that particular time. 

There are various reasons you could need a property valuation. 

One situation where you’ll be required to undergo a property valuation would be for stamp duty. 

Property isn’t always sold in an open market and transferred between unrelated parties. In some instances, the property is transferred between related parties (for example, between father and daughter) or into a trust threby triggering stamp duty on transfer of property.

If that is the case, the Office of State Revenue will need to ensure that the amount of stamp duty being paid is in accordance with the property’s fair market value. 

So, you’ll need to reach out to Rider Accountants and Advisors to undertake a stamp duty valuation of your property.