Legislation introducing a temporary concession from transfer duty for newly constructed dwellings in strata subdivisions has passed the Victorian Legislative Council and is currently awaiting Royal Assent.
The Duties Amendment (More Homes) Bill 2024 (the Bill) introduces a new off-the-plan concession for certain purchases where a contract to acquire property is entered into within a 12-month period commencing on 21 October 2024.
Unlike the current off-the-plan duty concession, which is limited to specific owner-occupiers, the new temporary concession will apply broadly to all purchasers, including investors.
Current off-the-plan concession
The current off-the-plan concession is available where a purchaser enters into a contract for an off-the-plan sale of land on which a building will be constructed or the lot refurbished.
Broadly, transfer duty payable on the sale of land is calculated on the ‘dutiable value’ of the land, which is typically the stated contract price. However, under the concession, the dutiable value of land is determined by deducting the cost of any construction that will occur on or after the date of the contract of sale from the contract price. The deduction of construction costs from the sale price will result in a reduction in duty payable.
To be eligible for the current off-the-plan concession:
- the purchaser must be eligible for either the principal place of residence (PPR) concession, or the first home buyer duty exemption or concession; and
- at least one purchaser must use the property as their home for a continuous 12-month period, starting within 12 months of possession of the property (i.e. typically settlement).
The purchaser must also meet one of the following threshold requirements after the off-the-plan concession is applied:
- first home buyer duty exemption or concession — the dutiable value of the property cannot exceed $750,000.
- PPR concession — the dutiable value of the property cannot exceed $550,000.
New temporary off-the-plan concession
Once legislated, the new concession will be available for off-the-plan purchases of dwellings (including apartments and townhouses) within strata subdivisions that have common property (e.g. such as a shared driveway).
The new concession will be available for contracts entered into on or after 21 October 2024 and before 21 October 2025. Eligibility is based on the date the contract of sale is entered into, irrespective of whether settlement occurs before, or after, the end of the 12-month window.
The concession will be available to all purchasers, including investors, companies and trusts. Accordingly, there is no requirement to be eligible for either the PPR concession or the first home buyer duty exemption or concession. Further, there is no threshold for the concession to apply.
The Bill also contains an integrity provision, designed to prevent taxpayers who have entered into a contract prior to 21 October 2024 from executing replacement documents to give the appearance that the contract was entered into within the eligibility period.
| Example of a calculation of duty on off-the-plan concession |
| On 1 November 2024, a purchaser signs a contract to purchase an apartment off-the-plan for $1 million prior to the commencement of any construction work. The vendor advises that $400,000 of the contract price will be spent on constructing the apartment.
The purchaser is able to deduct the construction costs when calculating the dutiable value of the property, which results in the dutiable value reducing from $1 million to $600,000. Duty on $600,000 is calculated at $31,070. Without the concession, duty on $1 million would have been calculated at $55,000. The duty saving to the purchaser is $23,930. |
How can Rigby Cooke Lawyers help?
The expansion of the off-the-plan concession to all purchasers, with no applicable thresholds, will provide relief to eligible purchasers in the form of duty savings. However, the broadened concession only has a limited 12-month window in which it will apply to contracts for the purchase of dwellings within strata subdivisions with common property.
We also note the following regarding the expanded concession:
- contracts signed before 21 October 2024, but settled during the 12-month window, are ineligible for the concession; and
- the concession does not apply to house-and-land packages that are not part of a strata subdivision that has common property.
Contact us
If you require further information regarding the off-the-plan concession, please contact the Tax team.
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