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Buying a property before any buildings works have started or are finished is commonly known as ‘buying off-the-plan’. When you buy off-the-plan, you may be eligible for the off-the-plan duty concession which can apply to contracts for:

  • Land and building packages.
  • Lots in vertical developments (such as residential towers).
  • Lots in horizontal developments (such as low-rise apartments and unit complexes).
  • Refurbished lots.

These properties may or may not involve a new subdivision.

The date of the contract is important as it affects the scope of the off-the-plan concession. 

How does the concession work?

You pay duty on the dutiable value of your property. This is usually the greater of the price paid for the property or its market value, except when the off-the-plan concession applies. In these circumstances, the dutiable value is the contract price minus the construction or refurbishment costs incurred on or after the contract date. This reduces the amount of duty to be paid. 

Example 1 - An off-the-plan apartment

Paige buys an apartment off-the-plan as her future home. The contract price, before any construction has started, is $620,000. The vendor advises Paige that after signing the contract, $465,000 of her contract price will be spent on constructing her apartment. 

This means that the dutiable value of Paige’s apartment, after applying the off-the-plan concession, is $155,000 ($620,000 - $465,000).

There are two methods of calculating this concession – the fixed percentage method and the alternative method. Your vendor will choose one of these methods.  

About six months before the settlement of your property, your vendor will advise your conveyancer or solicitor of the dutiable value of your property after applying this concession. If you want to estimate the duty you will pay on your property, you can then contact your conveyancer or solicitor.

You apply for this concession using our Digital Duties Form, which is generally completed and processed via Duties Online (DOL) by your vendor and your conveyancer, solicitor, financial institution or their agent. 

Note: The off-the-plan concession only applies where the contract price reflects the market value of the property being purchased. Otherwise, the dutiable value of the property is determined on the market value of the property at the time of the contract.

Am I eligible?

Eligibility depends on a number of factors, with the most important being the date of the contract.

Contracts signed before 1 July 2017

The off-the-plan concession is available to all purchasers and for all property types, including residential investment properties and commercial properties. There are no thresholds relating to the property’s value. The concession may apply even if you nominate a substituted purchaser on or after 1 July 2017.

You must pay at least the market value for your property. If your contract price is less than market value, the concession does not apply and duty will be assessed on the value of the property at the time you entered into the contract.

Learn how the concession is calculated

Contracts signed on or after 1 July 2017 

The off-the-plan concession is available in more limited circumstances. The property must be your principal place of residence and your must meet a value threshold and residence requirements.

The concession is not available, for example, for an off-the-plan holiday home, commercial or investment property.

Purchaser requirement

You must be eligible for either the principal place of residence concession or the first-home buyer duty exemption or concession to receive the off-the-plan concession. 

This means that all purchasers must be over 18 years old, except where a purchaser is the guardian of a person with a legal disability.

The concession is not available to a company or a trustee of a trust buying a property off-the-plan.

For first home buyers buying off-the-plan, all purchasers must meet the first home buyer exemption or concession eligibility criteria to receive the off-the-plan concession. This means all purchasers must meet the First Home Owner Grant (FHOG) eligibility criteria except the FHOG purchase price threshold.

This means that although you are ineligible for the FHOG, because you bought your first home for more than $750,000, you may still be entitled to the first home buyer duty exemption or concession and the off-the-plan concession.

Residence requirement

For off-the-plan contracts signed on or after 1 July 2017, at least one purchaser must use the property as their home for a continuous period of 12 months, starting within 12 months of possession of the property, which is normally settlement.

If the residence requirement is not met, duty will be reassessed and all concessions or exemptions removed. You must notify us within 30 days of any change in circumstances that may result in you failing to meet the residence requirement.

On request, and after being satisfied there is good reason, we may vary the residence requirement.

Dutiable value requirement

The dutiable value of your property is usually the greater of the price paid for the property or its market value except when the off-the-plan concession applies. In these circumstances, the dutiable value of your property is the contract price minus the construction costs incurred on or after the contract date.

To receive the concession on a contract entered into on or after 1 July 2017, the dutiable value of your home after applying the concession must satisfy the value thresholds for the first home buyer duty exemption or concession or principal place of residence concession:  

  • First home buyers
    The dutiable value of your property, after deducting the construction costs incurred on or after the contract date (the off-the-plan concession) from the contract price, must be $750,000 or less.

  • Home buyers
    If you are buying the property as your home, the value of your property, after deducting the construction costs incurred on or after the contract date (the off-the-plan concession) from the contract price, must be $550,000 or less.

If the value of your property satisfies the relevant threshold after applying the off-the-plan concession, you will be charged duty on that value. 

If, after applying the off-the-plan concession, the value of your property falls above the relevant threshold, you will be charged duty based on whichever is greater, the contract price or market value of the property.

If your contract price is less than market value, the off-the-plan concession does not apply and duty will be assessed on the value of the property at the time you entered into the contract.

Example 2 – Purchaser meets the first home buyer exemption requirements

After 1 July 2017, David signs a contract to buy a $740,000 unit in a new development as his home. He signs the contract before construction has started. It is David’s first home and he is eligible for the First Home Owner Grant and the first home buyer duty exemption and/or concession.

The vendor advises David that $343,000 of his contract price will be spent constructing his unit. This means that the dutiable value of David’s unit after applying the off-the-plan concession is $407,000 ($740,000 - $343,000). As the first home buyer duty exemption is available when the dutiable value of the property is $600,000 or less, David will not pay any duty.

Without the off-the-plan concession, David would pay land transfer duty on $740,000 in accordance with the first home buyer duty concession.

Example 3 - First home buyers ineligible for the First Home Owner Grant (FHOG)

After 1 July 2017, first home buyers Asha and Alex sign a contract to buy a house for $1,150,000 off-the-plan as their first home. The couple sign the contract before any construction has started. 

Asha and Alex satisfy the FHOG eligibility criteria but cannot receive the grant because the amount they are paying for the house exceeds the $750,000 threshold.

The vendor advises Asha and Alex that $517,500 of their contract price will be spent constructing the house. When the off-the-plan concession is applied to their transaction, the dutiable value of their house after applying the concession is $632,500 ($1,150,000 - $517,500).

While this is over the first home buyer duty exemption threshold of $600,000, it is under the first home buyer duty concession threshold of $750,000. Asha and Alex therefore only pay duty on $632,000 at the first home buyer concessional rate.

Without the off-the-plan concession, Asha and Alex would have had to pay land transfer duty on $1,150,000 at general rates.

Example 4 – Home buyer meets the principal place of residence concession requirements

After 1 July 2017, Sisi signs a contract to buy an off-the-plan apartment for $700,000. She is not a first home buyer but is buying the apartment to live in as her home. She signs the contract before construction has started.

The vendor advises Sisi that $525,000 of her contract price will be spent on constructing her apartment. This means that the dutiable value of her apartment, after applying the off-the-plan concession is $175,000 ($700,000 - $525,000).

This is less than the principal place of residence duty threshold of $550,000 so Sisi is entitled to the off-the-plan concession and the principal place of residence concession and will only pay duty on $175,000.

Without the off-the-plan concession, Sisi would have had to pay land transfer duty on $700,000.

Example 5 – Home buyer does not meet the principal place of residence concession requirements

After 1 July 2017, Leon signs a contract to buy an off-the-plan townhouse for $900,000. He is not a first home buyer but is buying the townhouse to live in as his home. When he signs the contract, the construction was at the frame stage.

The vendor then advises Leon that $283,500 of his contract price will be spent on constructing the remainder of the townhouse. 

This means that the dutiable value of Leon’s apartment, after applying the off-the-plan concession, is $616,500 ($900,000 - $283,500).

This is more than the principal place of residence duty threshold of $550,000, so Leon is not entitled to the off-the-plan concession or the principal place of residence concession. He must pay duty on $900,000.

Nominations made on or after 1 July 2017

Where there is a nomination, the key factor in determining eligibility for the off-the-plan concession is the date of the contract of sale. If the contract was signed before 1 July 2017, all purchasers can still apply for the concession even if they have been nominated as a substituted purchaser after 1 July 2017.

However, if the contract was entered into on or after 1 July 2017, any subsequently nominated substitute purchaser(s) must be eligible for the principal place of residence concession or the first home buyer duty exemption or concession for the off-the-plan concession to apply. This will be the case even if the nomination triggers the sub-sale provisions.

Refurbished lots

For the purpose of the concession, a refurbished lot is a contract for the refurbishment of an existing building where the refurbishment is not complete at the date of contract.

Examples of refurbishment are the conversion of an office building or warehouse into residential apartments and where new construction works take place internally but the facade or shell of the original building is retained.

For refurbished lots, the off-the-plan concession only applies to the first sale after registration of the plan of subdivision. It does not apply to subsequent transactions, including transactions which are sub-sales of property.

Related parties transactions

When a transaction involves unrelated parties dealing with each other independently, we generally consider that the contract price paid for a property is the market value of the property.

Unrelated parties dealing with each other independently are commonly described as trading at arm’s-length. In these circumstances, it is assumed that the amount paid for a property is the market value. However, if your contract involves related parties, such as relatives or related companies, we may request the market value of the property and will use market value to calculate the dutiable value of the property at the time of the contract.

The dutiable value includes any GST payable for the transaction.

Calculating the off-the-plan concession

There are two methods of calculating the off-the plan concession and the vendor must choose one. Both methods require information that only the vendor will know. 

In order to calculate the concession, the transferor or vendor must:

  1. Determine the percentage of construction completed as at the date of the contract of sale. 
  2. Select a method of calculating the concession and identify the relevant figures.
  3. Provide all these details to us when they complete the Digital Duties Form.

We use this information to assess duty, taking into account the concession as it applies. If the information provided is incorrect, both the vendor and purchaser (or transferor and transferee) are jointly and severally liable for any additional duty, including penalty tax and interest.

About six months before the settlement of your property, your vendor will advise your conveyancer or solicitor of the dutiable value of your property after applying the off-the-plan concession. You can then contact your conveyancer or solicitor to get this value if you want to estimate the duty on your property.

Determining the amount of construction completed at the contract date

We use either the whole of project or single lot approach to determine the percentage of construction or refurbishment to be completed after the contract date.  

The single lot approach is typically used for single-storey developments where there is no common property. With these properties, the following percentages, based on the progress payment schedule contained in a standard domestic building contract, can be used as a guide to determine the percentage of construction completed at the contract date:

  • 15 per cent for base (slab/foundations),
  • 30 per cent for frame,
  • 65 per cent for lock up,
  • 90 per cent for fixing, 
  • 100 per cent for completion.

For multi-storey developments, we usually use the whole of project approach. This is generally based on the progress payments claimed by the builder and supported by a quantity surveyor.

Note: An underpayment of duty occurs if the percentage of future construction or refurbishment is overstated.

More information on this subject is contained within Revenue Ruling DA-048 - Duty concession for off-the-plan sales – land and building packages and refurbishments.

Off-the-plan concession calculation methods

There are two methods for calculating the concession: 

  1. Fixed percentage method. 
  2. Alternative method.

A vendor or transferor chooses which method they want to use.  

Fixed percentage method

The fixed percentage method is a simpler method. 

It is based on a deemed ‘fixed percentage’ representing the maximum amount that can be attributed to the construction or refurbishment costs of the property under the contract price. 

If no construction has started at the date of the contract, the off-the-plan concession is calculated by multiplying the deemed fixed percentage for that class of building by the contract price. 

Otherwise, the deemed fixed percentage is proportionally reduced by the amount of any construction completed at the date of the contract. The remaining proportional amount of the deemed fixed percentage can then be multiplied by the contract price to produce the value of the off-the-plan concession. The dutiable value of the property can be obtained by deducting the calculated concession from the contract price. 

Calculating the off-the-plan concession using the fixed percentage only requires the following information:

  1. The contract price.
  2. The class of building of the property.
  3. The percentage of construction completed at the date of the contract.

More information on this method is contained in revenue ruling DA-048 - Duty concession for off-the-plan sales – land and building packages and refurbishments.

Alternative method

This method requires the transferor to determine and provide information on various values relating to the land and the cost of construction. 

These values are used in a series of calculations to determine the value of the construction or refurbishments costs paid or payable by the purchaser in the contract price. 

If no construction has started at the date of the contract, the full value of the derived cost of construction in the contract price is the amount of the off-the-plan concession. The derived value is deducted from the contract price for the property to calculate the minimum possible dutiable value for the property.

If, at the date of the contract, construction works have started but are incomplete, the derived value of the works is proportionally reduced by the amount of works completed at the date of the contract. The remaining proportional amount of the derived value of the works is then deducted from the contract price to produce the dutiable value of the property after applying the concession. Rounding down the percentage of construction completed at the date of the contract is not available with the alternative method. 

Duty is then calculated on the resulting dutiable value of the property.

The alternative method requires the transferor to determine and provide these values, which are used to calculate the concession: 

  • contract price,
  • GST 
  • market value of the parent land if the development involves subdivision,
  • unit entitlement ratio,
  • base land value,
  • percentage of infrastructure value,
  • off-the-plan value,
  • non-deductible costs unrelated to the physical construction,
  • deductible construction costs, 
  • percentage of construction completed at contract date.

The concession is calculated by:

  1. Multiplying the market value of the land to be subdivided by the unit entitlement ratio of the lot to derive the lot’s base land value. 
  2. Increasing the base land value by the percentage of infrastructure value to arrive at the lot’s off-the-plan value. 
  3. Deducting the off-the-plan value and the value of the non-deductible costs from the GST-exclusive contract price to determine the total construction costs value. 
  4. Determining the percentage of construction completed at the date of the contract.
  5. Multiplying the total construction costs value by the percentage of works completed after the contract date. The resulting figure is the amount of the off-the-plan concession.
  6. The dutiable value of the land, after applying the concession, is calculated by deducting the derived cost of construction occurring after the contract date from the GST-inclusive contract price.

The meanings of the terms used within the alternative method are:

Market value of the land 

This is the value for which the property might be reasonably sold, free from encumbrances, on the open market immediately before any infrastructure is in place. This is not the purchase price paid by the vendor, unless it has not changed since it was paid.

If the property is a lot on a subdivision, the market value will be the value of all the lands prior to subdivision. The unit entitlement ratio is then applied to determine the value of the land.

Unit entitlement ratio (UER)

This is the apportionment of a lot compared to the total land (parent lot) being subdivided. If there is no subdivision, the ratio is 100 per cent.

For example, where a $1 million block of land or building shell which is to be refurbished is divided into 10 equal lots, each lot would have a unit entitlement ratio of 1/10 and a base value of $100,000.

Base land value

This is the apportionment of a lot compared to the total land (parent lot) being subdivided. If there is no subdivision, the ratio is 100 per cent.

For example, where a $1 million block of land or building shell which is to be refurbished is divided into 10 equal lots, each lot would have a unit entitlement ratio of 1/10 and a base value of $100,000. 

Infrastructure value

The infrastructure value is a percentage representing the enhanced value that infrastructure adds to the land before any building works start. It does not represent the actual cost of infrastructure, such as the costs of obtaining the planning and building permits and approvals and other similar costs (infrastructure costs), but the value this infrastructure adds to the land.

Where the infrastructure value increases the base land value by more than 25 per cent, the actual increase should be provided. Where no reasonable valuation method is available, the Commissioner accepts a minimum 25 per cent increase of the base land value as appropriate for multi-lot developments. This is based on advice from the Office of the Valuer-General of Victoria. 

A claim that the infrastructure value increases the base land value by less than 25 per cent needs to be substantiated by evidence, such as a recent formal valuation. 

Off-the-plan land value

The off-the-plan land value is the amount for which the subdivided land might reasonably have been sold on the open market immediately before the contract of sale was entered into. 

This value must take into account the impact of the infrastructure to be provided before construction starts. This is irrespective of whether the infrastructure is in place before or after the date of the contract. The off-the-plan land value does not reflect the purchase price paid by the vendor for the property and/or the cost of the infrastructure, but the value that the infrastructure adds to the land. The off-the plan value is obtained by taking the base land value of the lot and increasing it by the infrastructure value.

Non-deductible costs

Non-deductible costs are costs incurred by the vendor that are not directly related to the physical construction or refurbishment of the building. For example:

  • Agent’s commission for selling the property.
  • Legal or other business expenses incurred in selling the property.
  • Advertising or promotional expenses.
  • Goods, including furniture packages.
  • GST on non-construction or refurbishment costs and construction or refurbishment that occurred prior to the contract date.

Construction costs (deductible costs)

Construction costs (including GST) are deductible costs and include:

  • Legal costs associated with the permit or bringing the building to completion.
  • Surveyors and consultant fees.
  • Planning permits.
  • Water and sewerage connections.
  • Building permits and other similar fees.
  • VicRoads approval.
  • Gas and electricity approval.
  • Required road access or utilities works.
  • Site decontamination.
  • Demolition and removal work.
  • Material, labour and finance for constructing the building.
  • The profit accruing to the builder/developer in relation to the building only. 
  • GST in respect of construction costs after the contract date.

GST

This is the GST payable by the vendor in relation to the sale of the property.

This figure is required to ensure that the portion of the GST claimed in respect of the cost of construction occurring on or after the contract date does not exceed the amount of GST paid pursuant to the contract of sale.

Apply for an off-the-plan concession

The vendor or transferor must complete the Digital Duties Form.

By entering the percentage of construction or refurbishment completed after the contract date and the other details required into the Digital Duties Form, the concession is automatically calculated.

Apply for the concession

Generally, the concession is processed via Duties Online (DOL) by your conveyancer, solicitor, financial institution or their agent.