What does off plan stamp duty cost, and when do you need to pay it?
Are there savings you’re not aware of? This article delivers straightforward insights on off-plan stamp duty costs, payment timelines, and concessions to ensure you’re financially savvy about your property purchase.
Make informed decisions and potentially save on your next investment with our focused guide.
Key Takeaways
- Off-the-plan stamp duty is calculated based on the property’s market value at contract signing, potentially offering savings as future construction costs are not included in the dutiable value.
- Eligibility for off-the-plan stamp duty concessions depends on residency criteria, contract dates, and dutiable value thresholds, with significant changes after 1 July 2017 impacting concession accessibility.
- The Digital Duties Form facilitates the application process for stamp duty concessions, while first home buyers and investors can benefit from other tax incentives and exemptions.
Decoding Off-The-Plan Stamp Duty
Off-the-plan stamp duty is a specific tax on property transfers for those buying off the plan. This tax is derived from the market value of the property when the contract is signed, not at settlement. You may be asking, how does this impact your off-the-plan purchase?
Typically, the rates for off-the-plan stamp duty progress upwards as the property’s market value rises. As such, variations in market value during the period between contract signing and settlement can influence the calculation of stamp duty for off-the-plan purchases.
The Basics of Stamp Duty on Off-The-Plan Purchases
With off-the-plan purchases, there may be some pleasant surprises in store. The dutiable value of a property is defined as either the purchase price or the market value, whichever is greater. However, for off-the-plan purchases, this value takes into account the property’s value at the time of sale, excluding post-sale construction costs.
This means the taxable dutiable value for off-the-plan properties can be less than the actual purchase price due to adjustments for future constructions. When determining stamp duty, the higher of the contract price or the market value is used in the calculation of the dutiable value, and this is when buyers are required to pay duty, including the transfer duty payable.
This Off-The-Plan Concession (OTP Concession) serves to reduce the dutiable value of the property, thereby lowering the stamp duty amount due.
Timing and Payment: When Is Stamp Duty Due?
The timeline for paying stamp duty varies by location. In New South Wales, transfer duty must be paid within three months of signing a contract for sale or transfer. However, for off-the-plan purchases that will be the buyer’s principal place of residence, transfer duty payment can be deferred for up to 12 months.
Remember, the duty is generally settled or scheduled for settlement as part of the overall settlement process, with the payment due within 30 days post-settlement in Victoria.
Eligibility Criteria for Stamp Duty Concessions
There are specific eligibility criteria to meet to qualify for off-the-plan stamp duty concessions. For instance, buyers must move into the property within 12 months after settlement and live there for a continuous period. Furthermore, eligibility in NSW requires buyers to be non-foreign citizens, including Australian citizens, New Zealand citizens with a subclass 444 visa, or permanent residents with over 200 days of residence in Australia in the past year.
Permanent members of the ADF are exempt from the residence requirement for off-the-plan concessions if all buyers are listed on the NSW electoral roll. Meeting these living requirements is critical because falling short can result in the duty becoming payable within three months from the contract’s start date, along with the possibility of accruing interest and potential penalty taxes.
Contract Date Significance
The contract date plays a pivotal role in determining your eligibility for off-the-plan stamp duty concession. Why? Because it’s all about the rules effective at that time. Different rules apply to contracts for off-the-plan purchases entered into before and after 1 July 2017, significantly impacting the availability and calculation of the OTP Concession.
For contracts entered into before 1 July 2017, the OTP Concession was accessible for all property types without thresholds related to the property’s value. However, the game changed for contracts signed after 1 July 2017, which are subjected to threshold requirements affecting eligibility for the OTP Concession and duty calculations based on the greater of the property value at the time of sale or the contract price.
Thresholds Relating to Property Value
Property value thresholds are a vital consideration in the context of off-the-plan stamp duty concessions, as they are closely related to the physical property being purchased. For instance, the off-the-plan apartment concession provides a full stamp duty concession on a transfer of a new or substantially refurbished apartment for a specific period, and a partial concession thereafter.
The dutiable value threshold for off-the-plan purchases to qualify for stamp duty concessions is typically under $550,000; however, stimulus packages can increase this threshold. For new homes valued at less than $650,000 exchanged between 01 July 2017 to 30 June 2023, a full exemption from transfer duty is available, and for homes valued between $650,000 and $800,000, a concessional rate applies.
Calculating Your Stamp Duty Savings
Imagine saving money while purchasing your dream home? It’s achievable by comprehending the off-the-plan concession (OTP concession), which lessens the dutiable value of an off-the-plan property and results in reduced stamp duty costs for buyers.
Lowering the dutiable value for off-the-plan purchases can lead to reduced stamp duty fees, offering financial benefits for buyers.
Understanding Construction Costs in Duty Calculation
The dutiable value of an off-the-plan property is adjusted to reflect the property’s value at the time of sale, excluding the cost of future construction. Construction costs incurred up to the time of sale are included in the property’s dutiable value.
Therefore, for off-the-plan properties with a market value of $500,000 or less, a specific formula is used to calculate the dutiable value. The vendor must determine the percentage of construction or refurbishment completed as of the contract date to apply for the off-the-plan duty concession.
Comparing Contract Price and Market Value
Stamp duty is calculated based on the higher of the property’s sale price or its current market value. If the contract price is lower than the market value due to a non-arm’s length transaction, the market value will be used for stamp duty calculation.
Evidence of the property’s market value may be required by the Chief Commissioner when the parties to the transaction are related or if the transaction includes uncommercial or unusual terms. A valuation by the Valuer General or a suitably qualified person may be required when evidence suggests that the declared transaction value does not reflect the property’s unencumbered value.
Navigating the Digital Duties Form
The Digital Duties Form is a tool that conveyancers, solicitors, financial institutions, or their agents can use to apply for the concession within the Duties Online (DOL) system.
EDR is designed to reduce time and administration costs while delivering fast and efficient services.
Gathering Required Documents
In order to apply for the off-the-plan stamp duty concession, the vendor must outline the percentage of construction completed at the date of sale and the method used to calculate the concession on the Digital Duties Form. Applicants in NSW must fill out the Purchaser/Transferee Declaration Form, which now has interactive tick boxes instead of statutory declarations.
Buyers should provide property information and conveyancer information when applying for off-the-plan concessions.
Submitting Your Application
The application for the off-the-plan concession is typically submitted by the conveyancer, solicitor, or financial institution’s representative through the Digital Duties Form. For contracts entered on or after 22 June 2017, ‘Application for Stamp Duty Concession on the Purchase of an Off-the-Plan Apartment’ must be completed and submitted for assessment.
The purchaser’s representative is tasked with completing their section of the Digital Duties Form to claim the concession, using information furnished by the vendor. At least one purchaser is involved in this process. The application process has been streamlined with new interactive forms that feature declaration tick boxes, eliminating the need for statutory declarations.
Tax Benefits Beyond Stamp Duty
Apart from stamp duty, other tax benefits should also be considered. The First Home Owner Grant is exclusively available for newly built homes, substantial renovations, or for homes bought off the plan, and does not apply to established homes.
First Home Buyer Advantages
First home buyers purchasing an off-the-plan property up to $800,000 will enjoy a full stamp duty exemption, saving up to $30,735, from 1 July 2023. If a first home buyer purchases an off-the-plan property valued between $800,000 and $1 million, they’ll pay a concessional rate of stamp duty rather than the standard amount.
Investment Incentives
For the investment enthusiasts, there are incentives to consider. Residential investment properties may be subject to land tax, affecting long-term cost considerations for investors. In contrast, commercial properties may offer different tax implications.
In New South Wales, land tax is levied on residential investment properties valued over $482,000 at a rate of $100 plus 1.6% of the property’s value, contributing to the overall investment cost.
Preparing for Settlement: What Buyers Need to Know
As a buyer, it’s important to fully grasp the contract before signing and seek answers to all questions through your solicitor. The deposit for off-the-plan purchases is typically 10% of the total price, but there may be special conditions allowing for smaller initial payments or installments.
Settlement Timeline and Responsibilities
Settlement typically takes place around six weeks after contracts are exchanged for residential property purchases in NSW. About six months prior to the settlement, the vendor will inform the purchaser’s conveyancer or solicitor of the dutiable value after applying the off-the-plan concession.
Dealing with Delays and Market Conditions
Delays and fluctuating market conditions are inherent aspects of the property buying process. Buying off the plan includes risks such as purchasing something that does not yet exist, which can lead to issues if the market conditions change or constructions are delayed. Developers selling off-the-plan properties are required to give purchasers a disclosure statement that includes crucial information such as sunset dates, which set a maximum timeframe for project completion and other conditional events that might impact the purchase.
Summary
In conclusion, understanding off-plan stamp duty and the associated benefits and responsibilities can enhance your home-buying journey. From decoding stamp duty to navigating the Digital Duties Form, calculating your potential savings to preparing for settlement, every step is crucial. By staying informed and working with professionals, you can navigate the intricacies of off-the-plan purchases with confidence.
Frequently Asked Questions
Do you pay stamp duty when buying off the plan in NSW?
Yes, there is a stamp duty concession for “off the plan” purchases in NSW. This means that stamp duty can usually be paid 15 months after the date of contract or the completion date, whichever comes first. This offers potential savings for buyers.
Is there stamp duty for off the plan in Qld?
Yes, in Queensland, you do pay stamp duty when buying property off the plan, unlike some other states that offer exemptions and concessions.
Who is exempt from stamp duty in Victoria 2023?
First-home buyers in Victoria are exempt from paying stamp duty if the property is valued at $600,000 or less, and they can receive a concession for properties valued between $600,001 and $750,000. This exemption and concession apply to contracts entered into from 1 July 2023.
What is off-the-plan stamp duty?
Off-the-plan stamp duty is a tax on property transfers, calculated based on the property’s market value at the time of contract signing, rather than at settlement.
Who is eligible for off-the-plan stamp duty concessions?
Eligibility for off-the-plan stamp duty concessions depends on factors such as contract date, property value thresholds, and buyer residency status. These factors determine whether an individual is eligible for the concessions.
