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If you buy a property before any buildings works have started or are completed, commonly known as ‘buying off-the-plan’, you may be eligible for the off-the-plan duty concession. The off-the-plan concession 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 off-the-plan duty concession works to reduce the value of property for duty purposes, by the costs of construction or refurbishment that occur on or after the contract date, which in turn reduces the amount of duty to be paid. 

​There are two methods of calculating this concession and the vendor must choose one. You must contact your vendor to get the dutiable value of your property, including the off-the-plan concession.

The date of the contract is important as it affects the scope of the off-the-plan concession. You apply for this concession using our digital duties form, which is generally, completed and processed via Duties Online (DOL) by your conveyancer, solicitor, financial institution or their agent. 

How does the concession work?

If you are entitled to the off-the-plan concession, the costs of construction or refurbishment which occur on or after the contract date can be deducted from the contract price. This means you only pay duty on the remaining amount. This is known as the dutiable value of the property including the off-the-plan concession.

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).

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.

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 is not available if you are buying, for example, an off-the-plan holiday home or commercial or investment property.

For contracts for a land and building package or refurbished lot signed on or after 1 July 2017, 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. 

Purchaser requirement

For off-the-plan contracts signed on or after 1 July 2017, all purchasers must be natural persons over 18 years old. The exception is where a purchaser is the guardian of a person with a legal disability.

A company or a trustee of a trust cannot buy a property and get the off-the-plan concession.

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.

First home buyers do not, however, need to satisfy the FHOG eligibility threshold, whereby the price paid for the property cannot exceed $750,000. 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 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, the transfer will be reassessed for duty with 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, we may vary the residence requirement but we must be satisfied there is good reason to do so.

Dutiable value requirement

The dutiable value of your property is usually the greater of the price paid for the property or its market value.

This is not, however, the case 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 including the concession, must satisfy the following first home buyer exemption or concession or principal place of residence concession value thresholds:  

  • First home buyers
    For first home buyers, the dutiable value of your property including the off-the-plan concession cannot exceed $750,000. That is, the dutiable value of your property, after the construction costs incurred on or after the contract date have been deducted from the contract price, has to be$750,000 or less.

  • Home buyers
    If you are buying the property as your home, its dutiable value including the off-the-plan concession cannot exceed $550,000. That is, the value of your property, after the construction costs have been deducted 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 based 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 as his home, a unit in a new development for $740,000. He signs the contract before any construction has started. It is David’s first home. 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 on constructing his unit. This means that the dutiable value of David’s unit including 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 in accordance with the first home buyer duty concession on $740,000.

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

After 1 July 2017, Asha and Alex sign a contract to buy a house for $1,150,000 off-the-plan. It will be 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 FHOG because the purchase price for their home exceeds the FHOG threshold of $750,000.

The vendor advises Asha and Alex that $517,500 of their contract price will be spent on constructing the apartment.

When the off-the-plan concession is applied to their transaction, the dutiable value of their house including this concession is $632,500 ($1,150,000 - $517,500). This is over the first home buyer duty exemption threshold of $600,000, but under the first home buyer duty concession threshold of $750,000. Asha and Alex are therefore entitled to pay duty on $632,000 at the first home buyer concessional rate.

Without the off-the-plan concession, Asha and Alex would 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 apartment off-the-plan 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 Sisi’s apartment, including 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 pay duty on $175,000.

Without the off-the-plan concession, Sisi would have 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 a townhouse off-the-plan 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 property has a frame in place.

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, including 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 a person has been nominated as a substituted purchaser after 1 July 2017.

However, if there is a nomination under a contract that was entered into on or after 1 July 2017, the substituted purchaser(s) must be eligible for the principal place of residence concession or the first home buyer duty exemption or concession. 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.

Base land value

The base land value is the value attributable to the un-subdivided land immediately before any infrastructure is in place, taking into account the unit entitlement ratio.

Unit entitlement ratio 

The unit entitlement ratio is the apportionment of a lot compared to the total land being subdivided.

For example, where a $1 million block of land or shell of a building to be refurbished is divided into 10 equal lots, each lot would have a unit entitlement ratio of 1:10, and each lot would have a base value of $100,000. If there is no subdivision, the unit entitlement ratio is 100 per cent.

Off-the-plan land value

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

This value must take into account all infrastructure to be provided in respect of the subdivided lot, irrespective of whether it is put in place before or after the date of the contract, as if construction had not commenced.

The off-the-plan land value does not reflect the purchase price paid by the vendor to acquire the property or the cost of the infrastructure. It is the value the infrastructure adds to the land.

Where the off-the-plan land value of the property has increased by more than 25 per cent because of infrastructure, the actual increase should be provided.

GST

The statutory declaration to be completed by the vendor requires a disclosure of the GST payable by the vendor in relation to the sale of the property.

This ensures 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.

Construction costs

Construction costs 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, and
  • GST in respect of construction costs after the contract date.

Non-deductible costs

Non-deductible costs are those costs which are incurred by the vendor and ultimately included in the contract price but which are not directly related to the physical construction or refurbishment of the building. Examples include:

  • 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, and
  • GST on non-construction or refurbishment costs and construction or refurbishment that occurred prior to the contract date

Percentage of construction

Details of the percentage of construction or refurbishment to be completed after the contract date are required as part of the application for the off-the-plan concession.

Typically, for single-storey developments the following indicates the percentage of construction at the various stages:

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

Multi-storey developments are 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.

Calculation of cost of works

By entering the percentage of construction or refurbishment completed before or after the contract date into the required statutory declaration, the cost of works completed before and after the contract date is automatically calculated.

Off-the-plan and sub-sales

The off-the-plan concession applies to land and building package transactions which are sub-sales under Part 4A of the Act.

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 such as transactions which are sub-sales under Part 4A.

 

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 before or after the contract date and the other details required into the digital duties form, the cost of works completed before and after the contract date 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.