Here are the answers to some frequently asked questions about the changes to the off-the-plan duty concession.

1. What was the previous off-the-plan (OTP) duty concession?

The existing OTP duty concession can apply to land and building purchases or refurbishments of an existing building. It can reduce the "dutiable value" of the property being transferred for duty purposes.

The OTP value is determined by deducting construction or refurbishment costs which occur on or after the contract date from the contract price . This means that for OTP purchases where construction has not commenced, the dutiable value of the property (after applying the OTP concession) will generally reflect the land value only.

Example 1 - An off-the-plan apartment

Paige buys an apartment off-the-plan for a contract price of $620,000 before any construction has started as her future home. The vendor advises Paige that after signing the contract, $465,000 of her contract price will be spent on constructing her apartment.

This means that after applying the off-the-plan concession, the dutiable value of Paige’s apartment is $155,000 ($620,000 - $465,000).

If some building work has begun at the time of contract, the dutiable value will generally reflect the value of the land and construction work completed at the time of contract.

2. What is the change?

The change means that the concession will only apply to buyers purchasing an OTP property to occupy as their home (principal place of residence) with a dutiable value under a certain threshold.

The change also means that the concession is no longer be available for OTP purchases of holiday homes, and investment or commercial properties.

3. How does the new OTP concession work?

The concession is relevant for determining whether a transfer meets the dutiable value threshold for a:

Principal place of residence concession (dutiable value up to $550,000), or
Proposed first home buyer duty exemption (dutiable value up to $600,000), or
Proposed first home buyer duty concession (dutiable value up to $750,000)

If a transfer is below the relevant dutiable value threshold (after applying the OTP concession), that dutiable value is then used to calculate the duty payable for the purpose of the principal place of residence (PPR) concession or the proposed first-home buyer duty concession.

No calculation is required if you are eligible for the proposed first-home buyer duty exemption.

The OTP concession is contingent on you, as a purchaser, meeting the residence requirement for the PPR concession or the proposed first-home buyer duty exemption/concession. Failure to meet the residence requirement will result in the transfer being reassessed with the concession removed.

You are obliged to notify the Commissioner if a change in circumstances occurs that may result in you failing to meet the residence requirement.

4. You are a first-home buyer. What criteria do you need to meet for the new OTP concession?

Your new home must have a dutiable value (after the OTP concession is applied) of $750,000 or less,
All purchasers and their partners must meet the FHOG eligibility criteria, and
At least one purchaser must use the property as their PPR for a continuous period of 12 months, commencing within 12 months of taking possession of the property (normally settlement)

5. This is not your first home purchase. What criteria do you need to meet for the new OTP concession?

Your new home must have a dutiable value (after the OTP concession is applied) of $550,000 or less,
You must meet all other criteria for the PPR concession, and
At least one purchaser must use the property as their PPR for a continuous period of 12 months, commencing within 12 months of possession of the property (normally settlement)

6. When does the new OTP concession start?

The revised OTP concession applies to eligible transfers resulting from contracts entered into on or after 1 July 2017.

If you enter into a contract before 1 July 2017 but settle after that date, the existing OTP concession will continue to be available.

7. Does the new OTP concession apply to nominations made after 1 July 2017?

The revised OTP concession will only apply to eligible transfers resulting from contracts entered into on or after 1 July 2017. This is because it is the contract date that determines which provisions will apply to a transfer, including where the original purchaser nominates a substitute purchaser.

Accordingly, if there is a nomination under a contract that was entered into before 1 July 2017, the current OTP concession will apply to the transfer to the substituted purchaser. This will be the case even if the nomination triggers the sub-sale provisions.

8. How does the new OTP concession work for non-first home purchasers and non-principal place of residence transactions?

The changes mean that the OTP concession no longer applies if you are purchasing a commercial or investment property.

9. Do the proposed changes affect related parties transactions?

No. The changes do not affect the current approach to related party transactions where the consideration paid for a property is less than market value (inadequate consideration paid).

For eligible contracts, dutiable value will still be calculated by determining the higher of the consideration paid (after the revised OTP concession is applied) and the unencumbered value (market value) of the subject property as at the date of the contract.

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Free Download: Pros & Cons Of Buying Off The Plan

Source: State Revenue Office

Ask Darryl Here if you have any questions relating to the first home buyers off the plan stamp duty changes

First Home Buyers Off The Plan Stamp Duty Changes

The Victorian Government announced various housing initiatives including abolishing stamp duty for some first-home buyers, changing the FHOG in regional Victoria, changes to the off-the-plan concession, and a tax for vacant residential property.

Here are the answers to some frequently asked questions about the changes to the off-the-plan duty concession.