Understanding The Off-The-Plan Stamp Duty Savings 

Are you considering buying a property off-the-plan? If so, it’s important to understand the stamp duty savings that are available, as many first-time home buyers are unaware of the savings they can receive when purchasing an off-the-plan property. In this blog post, we’ll explain what off-the-plan stamp duty savings are and how you can benefit from them. We’ll also provide some examples of how to make the most of these savings. So if you’re thinking of buying your first home, read on for all the information you need!

Firstly, let’s begin with defining some of the more common terms and discounts you’ll encounter. 

What is the dutiable value?

In most cases, the dutiable value is the contract price or the price you pay for a property including any GST, whichever is greater. 

What is stamp duty?

Is a tax paid to the state government and calculated from the property value. To determine how much stamp duty you need to pay, the Victoria government has 3 tiers. 

If the dutiable value is:

1. 0-$25,000= 1.4% of the dutiable value
2. $25,001-$130,000= $350 +2.4% of the dutiable value
3. $130,001- $960,000 =$2,870 + 6% of the dutiable value, >$960,000= 5.5% of the dutiable value. 

Principal Place of Residency (PPR)

Stamp duty concession for any person purchasing property with a dutiable value that’s $550,000 or less. This grant is available for all owner-occupiers, regardless of having previously owned property or not. 

First Home Buyer Exemption

Is the exclusion of the stamp duty tax, for first home buyers, on a property with a dutiable value that does not exceed $600,000, inclusive of the dutiable value. 

First Home Buyer Concession

Is a reduction in stamp duty paid for first home buyers if the dutiable value is between $601,000- $750,000. To be eligible for this concession the property does not have to be a new home. 

First Home Owner Grant

 Is a $10,000 grant for new home purchasers, the home purchased, must be a new home that’s never been occupied or previously sold.

How is dutiable value different when buying off-the-plan (OTP)? 

The OTP concession reduces the amount of duty paid when the purchase price is between $600,000-$750,000. For more information view the table above.

Conditions

To understand if and which grants you may be eligible for, we have created a checklist below.

First Home Owner Grant 

• Must be an Australian citizen or permanent resident, at least 18 years of age
• This must be your first home
• The purchase price of the home must not exceed $750,000
• The property must not have been lived in or sold before
• Must be intending to occupy the property within 12 months of settlement and for at least 12 months (cannot be an investment property)
• The contract is entered into between the 1st of July 2017 and to 30th of June 2022

First Home Buyer Duty Exemption and Concession

• Your home’s dutiable value does not exceed $600,000 (for exemption)
• Your home’s dutiable value is from $600,001 to $750,000 (for concession)
• The property must not have been lived in or sold before
• Must be intending to occupy the property within 12 months of settlement and for at least 12 months (cannot be an investment property)
• Must be an Australian citizen or permanent resident, at least 18 years of age
• The contract is entered into on or after the 1st of July 2017

Principal Place of Residence (PPR) Duty Concession

• You intend to move into the home within 12 months of settlement and will occupy the property for at least one year as your primary home
• The property has a dutiable value equal to or less than $550,000

How to determine the amount of stamp duty savings you’re entitled to

There are many different factors that determine the amount of savings you’re to receive. Firstly, you need to determine if you’re eligible to receive PPR or the FHG? If so, then you’re eligible to receive a duty concession.

Secondly, the amount of stamp duty paid is dependent on the level of construction at the time of signing the contract with the developer. To determine the amount of construction, the first factor of consideration is to determine the percentage of construction. The whole lot approach, which is applicable to apartment developments in Victoria, determines the stage of construction from the overall project, regardless of the individual lot or unit’s construction stage and is inclusive of the common areas. 

If construction is yet to commence, then it’s very simple to determine the amount of duty payable. It’s just the dutiable value (the contract price) minus the anticipated construction costs. 

There are many different stages of construction that factor into the amount of duty that you pay. 

If you purchase at the pre-construction stage, you can take advantage of the maximum off-the-plan incentives available. 

When calculating the off-the-plan stamp duty there are a few steps to follow. The off-the-plan stamp duty savings are calculated depending on the stage of construction that has been completed at the time of purchasing. 

1. What is the contract price of the property?
2. What is the class of the build? 

a. Multi-lot low rise- up to three storeys excluding the basement(s) = 60% of the deemed fixed price 

b. Multi-lot high rise- four storeys or more excluding the basements(s) = 75% of the deemed fixed price 

3. What stage of construction is the project at in percentage value, at the time of signing?

Once you have these numbers the class of the building is subtracted from the contract price. Then, subtract the % of construction from that figure. The final step is to subtract that amount from the contract price. 

Example

Joe purchased an off-the-plan apartment prior to construction commencing. The apartment’s contract price is $625,000 and the building will be 4 storeys, excluding the basement. 

The class of building: Multi-lot high rise =75%

Contract price = $625,000

% of construction = 0

Calculations:

1. 75% of $625,000 = $468,750
2. 100% of $468,750 = $468,750 which is the value of the off-the-plan concession

The dutiable value, after applying the concession, is $156,250 ($625,000- $468,750). 

This means that the FHOG (first home owners grant) applies, as does the first home buyer duty reduction and concession and the PPR (principal place of residency) and the first home buyer exemption as the dutiable value is under $600,000. 

If you sign the contract once construction has commenced, the % of construction changes according to the ‘whole lot’ approach. The construction % adjusts accordingly to the level of construction that’s been completed for the project on an overall basis. As this changes, it is always best to check with your sales representative, so they can give you an accurate figure. 

Different Stages of Construction At Burwood La Frank

Example 2

Mary purchases an off-the-plan apartment, when she signs the contract the project has completed 50% of the overall construction. The contract price is $650,000 and the project has 4 storeys. 

The class of the building: Multi-lot high rise =75%

Contract price = $650,000

% of construction =50%

Calculations:

1. 75% of $650,000 = $487,500
2. 50% of $487,500 = $243,750, which is the value of the off-the-plan concession

The dutiable value, after applying the concession, is $406,250 ($650,000- $243,750)

This means that the FHOG (first home owners grant) applies, as does the first home buyer duty reduction and concession and the PPR (principal place of residency). 

If you’re looking to purchase an off-the-plan property, it’s important to understand the different stamp duty exemptions, concessions and savings that are available. The three main ones are the first home owners grant, the first home buyer’s concession and exemption and the principal place of residency. Whilst these can be confusing we hope that this detailed blog has helped you to understand how you can save. The biggest opportunity to save is in the pre-construction and early construction phases of the project. For more information on how you can save contact our sales team who will be happy to help by filling in the form below or calling 1800 267 687.

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