Off-the-plan Duty Concession Explained
What is stamp duty?
Stamp duty describes the tax purchasers (or transferees) are required to pay on certain legal documents, usually in the transfer of assets or property. In the case of property transactions, stamp duty is calculated on the dutiable value of a property.
When you engage Merton Lawyers as your conveyancers, we will provide you with an estimate of the stamp duty payable on your purchase at the beginning of the conveyancing process to ensure that you have a clear understanding of any additional costs.
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 means that a property given as a gift, acquired through a trust or bought at a discounted price will attract stamp duty in an amount that reflects the market value of the property.
Off-the-plan Concession (OTP Concession)
OTP Concession reduces the dutiable value of a property which is purchased ‘off the plan’, and therefore reduces the amount of stamp duty which is payable by the purchaser (or transferee) of that property. Typically, the sale price of a property purchased off the plan will include the value of the property at the time of sale plus the value of the construction which will be completed after the time of sale and before settlement.
When the OTP Concession applies, the value of the property is adjusted to be representative of the property’s value at the time of sale, as opposed to the value which is reflected in the sale price. That is, the costs of construction completed post-contract are not included in the duty calculation. This means that if, at the time a property is sold, 10% of the construction is complete and the OTP Concession applies, then the dutiable value of that property will be equal to the sale price of the property minus the value of the remaining 90% of construction.
Which rules apply to you?
The date that you entered into the contract is important. This is because different rules apply for contracts which were entered into prior to 1 July 2017 than those which were entered into on or after 1 July 2017.
We’ve broken the difference down for you below.
Contracts entered into before 1 July 2017
The OTP Concession is available to all purchasers who signed a contract for an off-the-plan purchase before 1 July 2017. It applies to all property types, including residential investment properties and commercial properties and there are no thresholds relating the property’s value.
Contracts entered into after 1 July 2017
Contracts signed after 1 July 2017 are subject a several threshold requirements which qualify the application of the OTP Concession. We have detailed these requirements in the table below.
| Deadlock | Explanation |
|---|---|
| Dutiable value of the property | For first home buyers, the dutiable value of the property, after deducting the construction costs incurred on or after the contract date (i.e. the OTP Concession) from the contract price, must be $750,000 or less. For home buyer (who are not first home buyers), the dutiable value of the property, after deducting the construction costs incurred on or after the contract date (i.e. the OTP Concession) from the contract price, must be $550,000 or less. However, the Victorian Government has temporarily increased the above thresholds for all home buyers to $1,000,000 for contracts entered into on or after 1 July 2021 and before 1 July 2023. |
| Residence | At least one purchaser must use the property as their principal place of residence (i.e. their home) for a continuous period of 12 months, starting within 12 months of settlement, being the date the purchaser comes into possession of the property. It is important that you notify the State Revenue Office (SRO) if a change in your circumstances may result in you failing to meet the residence requirement. |
If you satisfy the above thresholds after applying for the OTP Concession, then you will be charged a duty calculated on the value of the property at the time of sale.
If you do not satisfy the above thresholds after applying for the OTP Concession, then you will be charged a duty based on whichever is greater, the contract price or the market value of the property.
Further eligibility requirements
In addition to the above, a purchase must be over 18 years old to be eligible for the OTP Concession, unless that purchaser is the guardian of a person with a legal disability. The OTP Concession is also not available to a company or trustee of a trust.
How can we help?
If you are eligible for the OTP Concession, or any other concessions, it is our job to apply for these concessions on your behalf using the Digital Duties Form on the SRO website.
Our team is also available to advise you and answer any queries about what concessions you might be eligible for.
