A temporary land transfer (stamp duty) concession for off-the-plan purchases within strata subdivisions has been announced by the Victorian Government. It is only eligible where a contract was entered into on or after 21st October 2024 and lasts for 12 months. Eligibility is based on the date the contract is entered into. It does not matter whether settlement occurs before or after the end of the 12-month window.
Free standing housing is not included in the change. To be eligible, an apartment, unit or townhouse must be in a strata subdivision, for example with a shared driveway. The clear and stated aim of the policy is to ‘pump as much stimulus into higher density living as possible”. This tax discount reduces initial total build costs, in turn helping affordability.
How will the temporary off-the-plan duty concession work?
The stamp duty concession will be available to all off-the-plan purchases. Under the concession, the purchaser will be able to deduct the construction costs incurred when determining the dutiable value of the purchaser’s property. All purchasers including investors, companies and trusts, are eligible for the concession, so there is no requirement to be eligible for either the principal place of residence duty concession, or the first home buyer duty exemption or concession.
Concessions were previously available for first home buyers and owner-occupiers purchasing off-the-plan, but the offer was capped. This new (limited time) stimulus extends that to investors and removes the cap.
Example of how the stamp duty concession works:
Jacinta has just signed a contract to buy an apartment for investment purposes off the plan in Melbourne for $790,000, before any construction has begun. She is advised that $400,000 of the contract price will be spent on the construction element of the home. Normally, she would pay $42,470 in stamp duty, however under this temporary change, she will pay $18,470 as she is able to deduct the construction costs when calculating the dutiable value of the property ($790,000-$400,000).
Note, if Jacinta was purchasing this to be her principal place of residence, duty payable would be $15,870, and would be zero if she was a first home buyer.
This shows the complexity of these tax calculations! Particularly when you consider it all changes again depending on the date the contract of sale was signed.
What about the finance?
It is important to note that property ownership transfer to you occurs at final settlement, when the property is finished, when you buy off-the-plan. At signing of contract a 10% deposit will be required, with the balance 90% of purchase price plus costs due at settlement.
Financially, you need to be able to fund the 10% at time of purchase without using the purchase property as security. Then your bank loan application to complete purchase will be made approximately 3 months before final settlement (which may be 18 months away or more!).
So, in terms of being able to complete the purchase, it is your financial position and what the bank assessment rules are in the future (when the property is finished), not now, that counts.
As in all property purchases, take care! There are many traps for the unwary, and expert advice should always be sought.
If this article has prompted any questions regarding your personal circumstances please contact your broker direct, or email support@ifafinance.com.au , or call us on 03 9511 8883.