2017 off-the-plan duty concession changes
From 1 July 2017, the off-the-plan concession changed to become the principal place of residence off-the-plan concession.
This concession is limited to buyers purchasing an off-the-plan property to occupy as their home (principal place of residence) with a dutiable value under the threshold.
Here are the answers to some frequently asked questions about this concession.
1. How does the off-the-plan duty concession work?
This concession applies to land and building purchases or refurbishments of an existing building. It can reduce the dutiable value of the property being transferred.
The off-the-plan value is determined by deducting construction or refurbishment costs occurring on or after the contract date from the contract price. This means that, for off-the-plan purchases where construction has not started, the dutiable value of the property, after applying this concession, will generally reflect the land value only.
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 after applying the off-the-plan concession, the dutiable value of Paige’s apartment is $155,000 ($620,000 - $465,000).
If some building work has started at the time of the contract, the dutiable value will generally reflect the value of the land and construction work completed at that time.
From 1 July 2017, the principal place of residence off-the-plan concession is restricted to buyers purchasing an off-the-plan property to occupy as their home with a dutiable value under a certain threshold.
Previously, the off-the-plan concession was available for purchases of all types of property. The change means that the concession is no longer available for off-the-plan purchases of holiday homes, investment properties or commercial properties.
This concession is now limited to the purchase of a principal place of residence and is relevant for determining whether a transfer meets the dutiable value threshold for a:
- Principal place of residence concession (dutiable value up to $550,000), or
- First-home buyer duty exemption (dutiable value up to $600,000), or
- First-home buyer duty concession (dutiable value above $600,000 and up to $750,000).
If a transfer is below the relevant dutiable value threshold, after applying the concession, that dutiable value is then used to calculate the duty payable for the purpose of the principal place of residence concession or the proposed first-home buyer duty concession.
No calculation is required if you are eligible for the first home buyer duty exemption.
The principal place of residence off-the-plan concession is contingent on a purchaser meeting the residence requirement for the principal place of residence concession or the first home buyer duty exemption or concession. Failure to meet the residence requirement will result in the transfer being reassessed and the exemption or concession removed.
You are obliged to notify us if there is a change in circumstances that may result in you failing to meet the residence requirement.
- Your new home must have a dutiable value after the off-the-plan concession is applied of $750,000 or less.
- All purchasers and their partners must meet the First Home Owner Grant eligibility criteria.
- At least one purchaser must use the property as their principal place of residence for a continuous period of 12 months, starting within 12 months of taking possession of the property, which is normally settlement.
- Your new home must have a dutiable value after this concession is applied of $550,000 or less.
- You must meet all other criteria for the principal place of residence concession.
- At least one purchaser must use the property as their principal place of residence for a continuous period of 12 months, starting within 12 months of possession of the property, which is normally settlement.
This concession applies to eligible transfers resulting from contracts entered into on or after 1 July 2017.
If you entered into a contract before 1 July 2017 but settled after that date, the previous off-the-plan concession continues to be available.
The principal place of residence off-the-plan concession only applies to eligible transfers resulting from contracts entered into on or after 1 July 2017. This is because the contract date determines which provisions apply to a transfer, including where the original purchaser nominates a substitute purchaser.
Accordingly, if there is a nomination under a contract entered into before 1 July 2017, the previous off-the-plan concession applies to the transfer to the substituted purchaser. This will be the case even if the nomination triggers the sub-sale provisions.
8. How does this concession work for non-first home purchasers and non-principal place of residence transactions?
The changes mean that if you enter into a contract to buy, for example, a holiday home or a commercial or investment property off-the-plan on or after 1 July 2017, you must pay duty on the full dutiable value of the property at settlement.
This is because the previous off-the-plan concession no longer applies.
No. The changes do not affect the current approach to related party transactions where the consideration paid for a property is less than market value (inadequate consideration paid).
If you are eligible for the principal place of residence off-the-plan concession, the dutiable value of your transaction is still calculated by determining the higher of the consideration paid after the revised off-the-plan concession is applied, and the unencumbered value (market value) of the subject property as at the date of the contract.