The off-the-plan concession in Australia is a reduction in the amount of transfer duty payable on the purchase of a new home that is still under construction. The concession is available to first home buyers and home buyers who intend to use the property as their principal place of residence.
Purchasing a home “off-the-plan” refers to doing so before any construction has begun or been completed. If you buy a property off the plan, you might be qualified for an off-the-plan concession which can apply to contracts such as:
- Refurbished lots
- Low-rise apartment lots
- Residential towers
- Land and building packages
In New South Wales, Australia, if you purchase an off-the-plan home that you intend to use as your primary residence, you can defer your land transfer duty for a period of up to a year:
- after signing the contract, or
- until the property is finished or transferred, whichever occurs first.
Are You Eligible for an Off-The-Plan Concession?
To be eligible for the off-the-plan concession, you must be a non-foreign citizen from July 2016. A non-foreign citizen is:
- an Australian citizen
- a New Zealand citizen
- holding a subclass 444 visa
- has lived in Australia for more than 200 days in the last 12 months
- a permanent resident
- who has lived in Australia for more than 200 days in the last 12 months.
What Are the Requirements for Living in the Property?
Revenue NSW provides for the requirements for living in the property:
- At least one purchaser or transferee must occupy the property as their main residence.
- The person occupying the property must live in the property for 12 months continuously, starting within 12 months from becoming the owner.
- From 19 May 2022, if you’re a permanent member of the Australian Defence Force (ADF) when buying the property and you and everyone you’re buying with is on the NSW electoral roll, you do not have to meet these living requirements.
- Complete the purchaser/transferee declaration.
What if I Don’t Meet All the Requirements?
Revenue NSW gives you three months from the contract’s start date to pay duty if you can’t prove that you meet the aforementioned living criteria. If duty is paid more than three months after the start of the contract date, you must also pay interest and possibly a penalty tax.
The off-the-plan concession is under the Australian government’s First Home Buyer Assistance Scheme. Under this scheme, first-time homebuyers may be eligible for a reduced rate of transfer duty.
Here are the rules from 01 July 2017 to 30 July 2020 and continuing from 01 August 2021 to 30 June 2023:
| New homes | Existing homes | Vacant land |
| Buy a new home valued at less than $650,000, apply for a full exemption, and pay no transfer duty. | Buy an existing home valued at less than $650,000, apply for a full exemption and pay no transfer duty. | If your land is valued at $350,000, you are not required to pay transfer duty. |
| Buy a new home valued between $650,000 and $800,000, and apply for a concession transfer duty rate. The amount will be based on the value of your home. | Buy an existing home valued between $650,000 and $800,000, apply for a concession transfer duty rate. The amount will be based on the value of your home. | For land valued between $350,000 and $450,000, you’ll receive a concessional rate. |
However, the NSW Government is expanding the First Home Buyers Assistance Scheme. For contracts that exchange on or after 1 July 2023, eligible first home buyers will receive an exemption from transfer duty for:
- purchases of new and existing homes up to $800,000 and
- a concessional rate of duty for homes up to $1,000,000.
Note: What is the dutiable value of a property? The dutiable value of a property is either the price a purchaser has paid for the property or its market value, whichever is greater. This value will vary depending on the stage of completion of the residential development.
What Are the Other Things To Consider When Buying Off-The-Plan?
- Before you decide to purchase a property off the plan, it’s a good idea to do some research on the developer and builder. It could be wise to avoid them if they have a poor history.
- Make sure you are familiar with the procedure for fixing any flaws or damage you discover after construction is finished.
- Get a builders warranty so you are covered in the event that the developer files for bankruptcy or is unable to finish the project.
- Before signing a contract, make sure to read the terms and conditions and ask any questions you may have. Asking a lawyer or conveyancer to look over the contract for you is a smart idea.
- Pay the deposit, which is usually 10% of the contract price. In order to safeguard the funds in the case of a developer’s bankruptcy, deposits and other instalment payments made under an off-the-plan contract must be placed in a trust or controlled money account beginning on December 1, 2019.
- In NSW, there is a ten-day cooling-off period after you exchange contracts. During this time, you have the right to withdraw from the contract without penalty.
- Keep up-to-date with the construction progress and attend any inspections offered by the developer.
- Before signing the contract, ask the following questions:
- Are there separate contracts for purchase of land and construction of the house?
- How do those contracts interact?
- Will there be additional construction costs or penalties if there are delays in building start dates?
- Exercise caution and obtain appropriate legal advice before signing any document or paying any money.
What are the protections that I may avail when buying property off-the-plan?
- Increased disclosure. Selling off-the-plan requires more information than selling an existing home. Vendors must include a disclosure statement, draft papers, and sunset dates and other conditional events in the contract.
- Notification of changes and statutory remedies. The buyer’s property may change throughout development. From December 1, 2019, vendors must notify buyers of material changes. Material particulars affect the lot’s use or enjoyment.
Buyers can cancel the contract and receive their deposit refunded if a major change prejudices them. They could settle the transaction and claim compensation for the modification.
- Cooling off period. Off-plan buyers have a 10-business-day cooling off period, longer than for existing homes (usually 5 business days). Buyers can cancel within the cooling off time and lose 0.25 percent of the purchase price.
The cooling off period can be waived or shortened if the purchaser’s lawyer or conveyancer delivers a certificate required by law and explains the contract and its ramifications.
- Sunset clauses. Developers must obtain customer consent before terminating a contract using a sunset provision or petition to the NSW Supreme Court to justify termination.
Seeking Legal Advice When Buying Property Off-The-Plan
If you are thinking about buying an off the plan property in NSW, it is important to seek legal advice to ensure that you fully understand the risks and benefits of this type of purchase. Buying off the plan can be a great way to secure a property at a lower price, but it also comes with a number of potential pitfalls.
JB Solicitors has a team of experienced property lawyers who can help you in understand the following legal considerations when buying off the plan in NSW:
- Understanding the terms of the contract
- Cooling-off period
- Sunset clause
- Stamp duty concession or stamp duty concessions
- Warranty and defects
An off the plan purchase can be a great way to avail concessional benefits. However, it is important to seek legal advice to ensure that you fully understand the risks and benefits of this type of purchase. By carefully reviewing the contract for sale and seeking advice from a qualified legal professional, you can ensure that your purchase proceeds smoothly and that you are fully protected.
Contact us now.
