Buying a home before any building works have started or have 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 that 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 price paid for the property or its market value, whichever is greater.
However, when the off-the-plan concession applies, the dutiable value is the contract price minus the construction or refurbishment costs incurred on or after the contract date. As this reduces the dutiable value of your property, it also reduces the amount of duty you pay.
Example 1: An off-the-plan apartment
Paige buys an apartment off the plan as her future home for $620,000. She signs the contract before any construction has started. The vendor advises Paige that $465,000 of the 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).
The off-the-plan concession also only applies where the contract price reflects the market value of the property being purchased. If your contract price is less than market value, duty will be assessed on the value of the property at the time you entered into the contract.
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.
Am I eligible?
Eligibility for the off-the-plan concession depends on several factors. The most important is when you signed your contract.
Temporary off-the-plan concession
If you do not meet the eligibility requirements for this concession, from 21 October 2024 a new temporary off-the-plan concession is available to all purchasers, including investors, companies and trusts, meaning there would be no requirement to be eligible for either the principal place of residence duty concession or the first home buyer duty exemption or concession. Read more here.
Contracts signed on or after 1 July 2023
There are certain requirements you must satisfy to receive the off-the-plan concession.
Purchaser requirement
You must be eligible for either the principal place of residence concession or the first home buyer duty exemption or concession.
For first home buyers, this means that you and anyone you buy the property with, must meet the First Home Owner Grant (FHOG) eligibility criteria except the FHOG purchase price threshold.
If you meet all of the FHOG eligibility criteria, including the purchase price threshold (i.e. the contract price for your property is $750,000 or less), you will be eligible for the FHOG, the first home buyer duty exemption or concession as well as the off-the-plan concession.
If you are ineligible for the FHOG only 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 if the off-the plan concession applies.
This is because the threshold for the purpose of the first home buyer duty exemption or concession is calculated by reference to the off-the-plan value, being the contract price less construction costs incurred after the contract date.
Residence requirement
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.
Contracts signed on or after 1 July 2021 and before 1 July 2023
The Victorian Government temporarily increased the thresholds for all home buyers to $1 million. This means that if the value of your property was $1 million or less after applying the off-the-plan concession, you will be charged duty on that lower value.
If the value of your property falls above the $1 million threshold after applying the off-the-plan concession, you will be charged duty based on the contract price or market value of the property, whichever is greater.
All other requirements remain the same.
Contracts signed on or after 1 July 2017 and before 1 July 2021
For these contracts, the off-the-plan 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 off-the-plan 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 — the off-the-plan 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 the value of your property falls above the relevant threshold after applying the off-the-plan concession, you will be charged duty based on whichever is greater, the contract price or market value of the property.
All other requirements remain the same.
Contracts signed before 1 July 2017
For 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.
If you will live in the property as your home, you may also be eligible for:
- the FHOG if you meet the first home owner grant eligibility criteria and the contract price for your property was $750,000 or less
- the first home buyer duty reduction if you meet the first home owner grant eligibility criteria and the dutiable value of your property (after applying the off-the-plan concession to your contract price) is $600,000 or less
- the principal place of residence duty concession if the dutiable value of your property (after applying the off-the-plan concession to your contract price) is $550,000 or less.
Nominations
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 substitute 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.
Examples of how the off-the-plan concession works
Example 2: Purchaser meets the first home buyer exemption requirements but is ineligible for the FHOG
Gustavo signs a contract on 19 July 2023 to buy an apartment off the plan for $950,000. He is a first home buyer and intends to live in the apartment as his home. Gustavo signs the contract before construction has started. The vendor advises Gustavo that $510,000 of his contract price will be spent constructing his apartment.
Gustavo is ineligible to receive the FHOG because the contract price for the apartment is greater than $750,000. However, he is eligible to receive the first home buyer duty exemption because the dutiable value of the apartment after applying the off-the-plan concession is $440,000 ($950,000 – $510,000), being less than the $600,000 threshold.
As Gustavo is eligible to receive the first home buyer duty exemption, he will not pay any duty on the transfer of the apartment to him.
In this example, the duty position would be the same if Gustavo signed the contract on any date commencing from 1 July 2017.
Example 3: Purchaser meets the first home buyer exemption requirements
David signs a contract on 18 September 2020 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 $333,000 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 – $333,000). Because 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, with the amount of duty calculated after applying the first home buyer concession.
In this example, the duty position would be the same if David signed the contract on or after 1 July 2021 and on or before 30 June 2023.
Example 4: Purchaser is a first home buyer and the off-the-plan value is more than $750,000
Kris buys an apartment off the plan on 1 October 2021 for $1,300,000. He is a first home buyer. He signs the contract before any construction has started. The vendor advises Kris that $530,000 of his contract price will be spent on constructing his apartment.
Although the off-the-plan value of the apartment is above the $750,000 threshold for the first home buyer concession (it is $770,000, being $1,300,000 – $530,000), it is below the new temporary threshold for the off-the-plan concession of $1 million that applies for contracts entered into between 1 July 2021 and 30 June 2023.
This means Kris will pay general land transfer duty rates on a dutiable value of $770,000. Without the off-the-plan concession, Kris would pay land transfer duty at general rates on $1,300,000.
If Kris had signed the contract on or after 1 July 2017 and on or before 30 June 2021, or from 1 July 2023, he would have to pay land transfer duty at general rates on $1,300,000. This is because the off-the-plan value of his home is more than the first home buyer concession threshold of $750,000 and the temporary threshold of $1 million does not apply to contracts signed before 1 July 2021, or from 1 July 2023.
Example 5: Purchaser is a first home buyer and the off-the-plan value is more than $600,000 but not more than $750,000
Li-Na buys an apartment off the plan on 1 October 2020 for $1,200,000. She is a first home buyer. She signs the contract before any construction has started. The vendor advises Li-Na that $470,000 of her contract price will be spent on constructing her apartment.
Although the off-the-plan value of the apartment is above the $600,000 threshold for the first home buyer exemption (it is $730,000, being $1,200,000 – $430,000), the first home buyer concession is available because it is not more than $750,000.
This means Li-Na will pay duty on a dutiable value of $730,000 after taking into account the first home buyer concession. Without the off-the-plan concession, she would pay land transfer duty at the general rate on $1,200,000.
In this example, the duty position would be the same if Li-Na signed the contract when the temporary higher threshold applied for contracts entered into between 1 July 2021 and 30 June 2023, or after 1 July 2023.
Example 6: Home buyer meets the principal place of residence concession requirements
Sisi signs a contract on 5 August 2019 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 off-the-plan value of her apartment is $175,000 ($700,000 – $525,000).
This is less than the $550,000 threshold for the principal place of residence concession. Sisi is entitled to the off-the-plan concession and the principal place of residence concession and will only pay duty on $175,000 at the principal place of residence concession rates.
Without the off-the-plan concession, Sisi would have paid land transfer duty at the general rate on $700,000.
In this example, the duty position would be the same if Sisi signed the contract on or after 1 July 2021 and on or before 30 June 2023.
Example 7: Purchaser is a home buyer and the off-the-plan value is more than $550,000
John buys an apartment off the plan on 1 August 2021 for $1,100,000. He is not a first home buyer but intends to live in the apartment as his home. He signs the contract before any construction has started. The vendor advises John that $500,000 of his contract price will be spent on constructing his apartment.
Although the off-the-plan value of the apartment is above the $550,000 threshold for the principal place of residence concession (it is $600,000, being $1,100,000 – $500,000), it is below the temporary off-the-plan threshold of $1 million.
Provided John meets all the requirements for the principal place of residence concession (other than the threshold), John will pay land transfer duty at the general land transfer duty rates on the reduced dutiable value of $600,000.
Without the off-the-plan concession, John would have paid land transfer duty on $1,100,000.
If John had signed the contract on or after 1 July 2017 and on or before 30 June 2021, or from 1 July 2023, he would have to pay land transfer duty at general rates on $1,100,000. This is because the off-the-plan value of his home is above the $550,000 threshold for the principal place of residence concession and the temporary threshold of $1 million does not apply to contracts signed before 1 July 2021, or from 1 July 2023.
Example 8: Purchaser is a home buyer and the off-the-plan value is more than $550,000
Misha buys a townhouse off the plan on 1 December 2021 for $1,700,000 to live in as his home. He signs the contract before any construction has started. The vendor advises Misha that $600,000 of his contract price will be spent on constructing his apartment.
Misha will pay land transfer duty at the general rates on $1,700,000 because the off-the-plan value of his apartment is $1,100,000 ($1,700,000 – $600,000). This is above the temporary threshold of $1 million for the off-the-plan concession.
In this example, the duty position would be the same if Misha signed the contract before 1 July 2021, or from 1 July 2023.
Example 9: First home buyers ineligible for the First Home Owner Grant (FHOG)
First home buyers Asha and Alex sign a contract on 3 February 2020 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 FHOG threshold.
The vendor advises Asha and Alex that $517,500 of their contract price will be spent constructing the house. After applying the off-the-plan concession to their transaction, the dutiable value of their house 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 pay duty only on $632,500 after applying the first home buyer concession.
Without the off-the-plan concession, Asha and Alex would have paid land transfer duty on $1,150,000 at general rates.
In this example, the duty position would be the same if Asha and Alex signed the contract on or after 1 July 2021 and on or before 30 June 2023.
Example 10: Construction underway before contract is signed
RJB Pty Ltd is building a multi-lot high rise development consisting of 25 apartments. It has been selling apartments off the plan while it completes construction of the development.
Aaliyah agrees to buy an apartment for $800,000. She is not a first home buyer but intends to live in the apartment as her home. At the time of signing the contract, RJB has completed 20% of the construction relating to Aaliyah’s apartment. Upon settlement of her purchase following completion of construction, RJB, as the vendor, provides information to enable the off-the-plan concession to be calculated.
RJB decided to use the fixed percentage method, rather than the alternative method, as set out in Ruling DA-048v2. Under the fixed percentage method, construction costs for an apartment in a multi-lot high rise are considered to represent 75% of the contract price, in this matter $600,000 ($800,000 × 75%).
The vendor advises that 20% of the construction works are complete at the date of the contract which means that 80% of construction works are considered uncompleted as at the date of contract, or $480,000 (being the total cost of construction of $600,000 × 80%) out of the contract price of $800,000 is considered to have been paid in respect of construction after the date of contract.
As a result, for Aaliyah’s apartment, the value of the land and construction completed as at the date of contract (otherwise known as the off-the-plan value of the apartment) is considered $320,000 (contract price of $800,000 less construction costs after contract of $480,000).
As this is less than the $550,000 threshold for the principal place of residence concession, Aaliyah is eligible for the off-the-plan concession and the principal place of residence concession. This means she will pay duty on $320,000 at the principal place of residence concession rates.
Without the off-the-plan concession, Aaliyah would have paid land transfer duty at the general rate on $800,000.
More information on calculating the off-the plan concession, including how to determine the percentage of construction completed at the date of sale and the 2 methods available for calculating the concession, can be found in Revenue Ruling DA-048v2 - Duty concession for off-the-plan sales.
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.
The off-the-plan concession only applies to the first sale after registration of the plan of subdivision, not to subsequent transactions, including transactions which are sub-sales of property.
Related parties transactions
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.
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, including any GST, of the property at the time of the contract.
Calculating the off-the-plan concession
There are 2 methods of calculating the off-the plan concession — the fixed percentage method and the alternative method — and your vendor must choose one. Both methods require information that only the vendor will know.
About 6 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. If you want to estimate the duty you will pay on your property, you can then contact your conveyancer or solicitor.
In order to calculate the concession, the transferor or vendor must:
- Determine the percentage of construction completed as at the date of the contract of sale.
- Select a method of calculating the concession and identify the relevant figures.
- 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 (transferor and transferee) are jointly and severally liable for any additional duty, including penalty tax and interest.
More information on calculating the off-the plan concession, including how to determine the percentage of construction completed at the date of sale and the 2 methods of calculating the concession, is available in Revenue Ruling DA-048v2 - Duty concession for off-the-plan sales.
Applying for an off-the-plan concession
Generally your conveyancer, solicitor, financial institution or their agent applies for the concession through Duties Online (DOL) and completing the Digital Duties Form.
Your vendor or transferor, or their representative will enter the percentage of construction or refurbishment completed after the contract date and the other details required into the Digital Duties Form, which automatically calculates the concession. Your representative will complete your part of the Digital Duties Form to claim the concession.
