What is Stamp Duty?
Stamp duty, often just called ‘duty’ or ‘transfer duty’, is a type of tax collected by state and territory governments in Australia. It’s charged when certain assets like property or vehicles are bought or transferred from one owner to another. This tax can be charged at a fixed rate or based on the value of the transaction.
For example, if someone buys a house, they pay stamp duty based on the price they pay for it. Each Australian state or territory has its own rules and rates for stamp duty. Because of this, the amount of stamp duty payable can vary significantly depending on where the purchase is made and how much the asset costs.
Which Transactions Attract Stamp Duty?
Stamp duty applies to many common transactions, such as:
- Motor vehicle registration and transfers
- Insurance policies
- Leases and mortgages
- Hire purchase agreements (like vehicle loans)
- Transfers of property, including houses, businesses, and certain types of shares
Stamp Duty in Property Transactions
Property transactions are one of the most common times when stamp duty becomes important. When a property is purchased, the buyer typically pays stamp duty, and the amount paid is based on the value of the property.
Here’s an example of what stamp duty might look like in practice:
“Fred purchases a vacant commercial investment property for $1,000,000. As the property is not deemed to be the sale of a going concern, GST of $100,000 is imposed. Fred’s lawyer Dennis sends Fred a bill for Stamp Duty $43,775.”
– Australian Bookkeepers
Network, Edition 101
This means Fred not only pays for the property itself and GST but also stamp duty calculated according to the rates in the state or territory he’s purchasing in.
Bookkeepers and Stamp Duty: What's Allowed?
A common question is whether bookkeepers, especially those who are BAS agents, can deal with stamp duty transactions. The good news for bookkeepers is that managing stamp duty transactions isn’t regulated by the Tax Practitioners Board (TPB). This means that BAS agents and bookkeepers can handle stamp duty tasks for their clients.
However, usually, lawyers handle the legal side of stamp duty transactions, such as during the purchase of property or business assets. Bookkeepers mainly need to be aware of the stamp duty payment, properly record it, and ensure that it’s correctly accounted for within the business’s financial records.
Accounting for Stamp Duty
Stamp duty payments are not tax-deductible for businesses, but they do form part of the cost base of an asset. This means that the stamp duty paid is added to the cost of the asset in the business’s accounting records. For instance, if a business buys a vehicle or property, the stamp duty paid on that purchase becomes part of the total asset cost in the financial records.
For GST purposes, stamp duty generally doesn’t include GST itself. It’s classified under a special tax code that excludes it from BAS reporting, typically labelled as “BAS Excluded” or “N-T” (non-taxable).
Anti-Avoidance Rules for Stamp Duty
There are strict rules to stop people or businesses from trying to avoid or reduce stamp duty payments. State and territory revenue offices can reverse any arrangement made specifically to lower the stamp duty payable. They closely examine transactions occurring within 12 months of a stamp-duty-liable transaction to ensure no attempts have been made to unfairly lower the stamp duty amount.
Understanding stamp duty helps bookkeepers keep accurate records, manage their client’s financial data effectively, and ensures compliance with relevant state or territory laws. This guide provides the foundational knowledge to handle stamp duty confidently and clearly.
