Temporary off the plan duty concession

If you're a Melbourne resident eyeing a new apartment or townhouse, there's some exciting news you won't want to miss. In October 2024, the Victorian Government rolled out a temporary off the plan duty concession, a scheme designed to shake up the property market and put more money back in buyers' pockets. This initiative slashes stamp duty costs for off the plan purchases, potentially saving you tens of thousands of dollars, and it's open to everyone, not just first-timers or owner-occupiers. Curious about how it works and whether it's right for you? Let's dive into the details and explore what this could mean for your next property move.

What is Stamp Duty and Off the Plan Purchasing?

Before we get into the nitty gritty of the concession, let's cover the basics. Stamp duty, or land transfer duty as it's officially called in Victoria, is a tax you pay when you buy a property. It's based on the property's value and can add a hefty chunk to your upfront costs. For a $790,000 apartment, for instance, you might be looking at over $42,470 in stamp duty without any relief.

Now, what does "off the plan" mean? It's when you buy a property that hasn't been built yet or is still under construction. Instead of walking through a finished home, you're signing up based on plans, designs, and promises from the developer. This type of purchase has always had its perks, like lower stamp duty for some buyers, but the new temporary concession takes things to another level.

The New Temporary Off the Plan Duty Concession Explained

The Victorian Government kicked off this scheme on 21 October 2024, and it's got a 12 month lifespan, running until 21 October 2025. The Duties Amendment (More Homes) Act 2024, which got the green light on 19 November 2024, makes it official. If you sign a contract within this window, you're in, even if the property isn't finished until later.

This concession is all about off the plan homes in strata subdivisions with common property. Think apartments in a high rise with a shared lobby, units with a communal garden, or townhouses with a joint driveway. Standalone houses or house and land packages without shared spaces don't make the cut.

The goal? Boost the property market, spark more development, and make buying off the plan more affordable for Melburnians. And with Melbourne's skyline always evolving, this could be a game changer for anyone looking to snag a new place in the city or suburbs.

How the Concession Works

Here's where it gets interesting. The concession lets you subtract construction costs that happen after your contract date from the purchase price when figuring out stamp duty. This lowers the "dutiable value," which is what the tax is based on.

Imagine you're buying an off the plan apartment in Southbank for $790,000, and $400,000 of that is for construction still to come. Normally, you'd pay stamp duty on the full $790,000, which comes to $42,470. But with this concession, you deduct the $400,000, leaving a dutiable value of $390,000. Guess what? That's below the threshold where stamp duty kicks in, so you'd pay nothing. Zero. Nada.

There's no upper limit on property prices, so whether you're eyeing a modest unit or a luxury penthouse, the concession applies. And there's no income test either, making it fair game for buyers of all stripes.

Who Benefits from the Concession?

This is where the scheme really shines. Unlike older concessions that were just for first home buyers or people planning to live in the property, this one's open to everyone. Here's who can get in on the action:

First home buyers: Saving on stamp duty could make that first step onto the ladder much easier.
Owner-occupiers: Upgrading or downsizing? You're covered.
Investors: Looking to grow your portfolio? This applies to you too.
Companies and trusts: Businesses can benefit as well.
Foreign buyers: Even overseas purchasers qualify, though they'll still face the foreign purchaser additional duty (FPAD) on the full price.

This is a big shift. Before, if you signed a contract after 1 July 2017, off-the-plan concessions were only for those getting the principal place of residence concession or first home buyer breaks. Now, investors and others who were left out can finally cash in. For foreign buyers, just a heads up: the FPAD, which is extra duty on top of the standard rate, still applies to the original price before the concession.

Comparing with Existing Concessions

Worried this replaces other deals? Don't be. The temporary concession sits alongside existing off the plan benefits. If you're a first home buyer or owner occupier, you might already qualify for stamp duty cuts. This new scheme just adds another layer of savings, and in some cases, you could stack them together for a bigger win.

For example, a first home buyer snapping up a $650,000 unit might dodge stamp duty entirely by combining the first home buyer exemption with this concession. It's worth crunching the numbers to see how the pieces fit for you.

The Application Process

So, how do you claim this? It's pretty straightforward. The vendor handles most of the heavy lifting through the Digital Duties Form, a system run by the State Revenue Office of Victoria. They'll need to plug in details about construction costs and pick one of two calculation methods: the fixed percentage method or the alternative method.

About six months before settlement, the vendor will let your conveyancer or solicitor know the adjusted dutiable value. That's your cue to check in with your conveyancer, get the final figure, and see what your stamp duty bill looks like. Easy, right?

Things to Consider When Buying Off-the-Plan

The concession's a sweet deal, but off the plan buying isn't without its quirks. Here's what to keep in mind:

Development risks: Construction could hit snags, plans might change, or the developer could go bust.
Market fluctuations: The property's value could rise or dip by the time it's done.
Financing challenges: Banks might tighten lending rules before settlement, so lock in your loan early if you can.
Quality uncertainties: You're betting on blueprints, not a finished product, so quality's a bit of a wild card.

Do your homework. Dig into the developer's history, read the contract with a fine tooth comb, and know your rights if plans shift. Also, think about timing. How long are you willing to wait for your new place?

Real World Examples

Let's bring this to life with a couple of stories.

David's Story

David's a young professional who just signed up for a $790,000 apartment in Melbourne's CBD. The developer says $400,000 will go into construction after the contract. Without the concession, David's stamp duty would be $42,470. But by subtracting the construction costs, his dutiable value drops to $390,000, below the duty threshold. Result? He pays nothing and keeps that $42,470 in his pocket.

Julia's Story

Julia's an investor eyeing a $1.2 million townhouse in Geelong, still unbuilt. Construction costs are pegged at $750,000. Normally, she'd owe $66,000 in stamp duty. With the concession, her dutiable value falls to $450,000, cutting her duty to about $22,070. That's a saving of nearly $44,000, which she can put towards her next investment.

Conclusion

Melbourne buyers, this temporary off the plan duty concession is a golden ticket. Whether you're stepping into your first home, adding to your rental portfolio, or snapping up a swanky new unit, the savings are real, and the clock's ticking until 21 October 2025. With no price ceiling and eligibility for all, it's a rare chance to make your property dollars stretch further.

But let's be honest, off the plan purchases can feel like a maze. That's where expert help comes in. If you're wondering how this concession applies to you or want a second set of eyes on your contract, reach out to Pearson Chambers Conveyancing. They're pros at untangling property deals and can give you tailored advice plus a free Section 32 contract review. Don't miss out, give them a shout today.

Phone: 03 9969 2405
Email: contact@pearsonchambers.com.au