The off-the-plan (OTP) concession applies to purchases of land and building packages or refurbished lots. It allows a deduction of the cost of construction or refurbishment which occurs on or after the contract date from the contract price. This means duty is only paid on the improved value of the land, the non-deductible costs and the completed construction or refurbishment including GST as at the contract date.
The date of the contract is important as it affects the scope of the OTP concession.
Contracts signed before 1 July 2017: The concession is available for all property types including residencies purchased for investment purposes and commercial properties. This is even if you nominate a substituted purchaser on or after 1 July 2017.
Contracts signed on or after 1 July 2017: The concession is only available for the purchase of a home. The transfer must also qualify for the PPR concession or the first-home buyer duty exemption/concession which impose a 12-month residence requirement and certain thresholds. Failure to meet the residence requirement will result in the transfer being reassessed with the concession removed.
Land and building packages
For the purposes of the OTP concession, a land and building package is a contract for the purchase of a building such as a new house, apartment, unit, commercial premises.
The concession applies to either a single lot development (for example, a suburban house and land package) or a multi-lot horizontal development (for example an apartment in a residential tower.
The concession is available whether or not there has been a new subdivision.
A refurbished lot, for the purpose of the concession, 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 under Part 4A of the Act.
Apply for an off-the-plan concession
The vendor or transferor must complete the appropriate form. If the contract of sale was entered into on or after 1 October 2008, this will be the off-the-plan statutory declaration.
Generally, the concession is processed via Duties Online (DOL) by your conveyancer, solicitor, financial institution or their agent.
If the contract date is before 1 October 2008, you will need to use the following (archived) forms for:
Contracts entered into on or after 1 October 2008
A simpler “fixed percentage” method for calculating the concession is available for contracts entered into on or after 1 October 2008. Transferors, however, can still use the current “alternative” calculation method if they wish.
All transferors must make a statutory declaration irrespective of which calculation method is used.
The following explanations will help you complete the statutory declaration.
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 (UER).
Unit entitlement ratio (UER)
The UER 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 UER of 1/10, and each lot would have a base value of $100,000. If there is no subdivision, the UER 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.
The statutory declaration to be completed by the purchaser requires a disclosure of the GST payable by the vendor with regard to the sale of the property.
This is 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.
Construction costs include:
- Legal costs associated with the permit or bringing the building to completion,
- Surveyors and consultants fees,
- Planning permits,
- Water and sewerage connections,
- Buildings permits and other similar fees,
- VicRoads approval,
- Gas and electricity approval,
- Required road access or utilities works,
- Site decontamination costs,
- Cost of demolition and removal work,
- Cost of 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 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 (slab/foundations et cetera),
- 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 OTP 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.