Sweeping changes to the Victorian off-the-plan stamp duty concession will increase duty on most sales ahead

By Cameron Forbes, Sharene Hambur and Alison Kennedy

20 Jul 2017

Victoria's off-the-plan stamp duty concession will soon be a distant memory for the vast majority of off-the-plan sales.

The Victorian Government has made significant and sweeping changes to the off-the-plan concession which will effectively eliminate the concession from operating to reduce the Victorian stamp duty payable in the vast majority of off-the-plan sales, including purchases of investment properties.

Consequently, following these changes the off-the-plan concession will not, except in limited circumstances, be a stamp duty saving trump card that can be utilised by developers in enticing prospective purchasers to execute sale contracts at the early stage of development.

Previous state of play

Ordinarily for the acquisition of Victorian real estate, the "dutiable value" of the property comprises the higher of the market value or "consideration".

In broad terms, the Victorian duties legislation previously contained certain provisions which could effectively reduce the duty paid on acquisitions of Victorian real estate under off-the-plan contracts by deducting from the dutiable value of the subject land, the cost of any works completed after the contract date. This was colloquially known as the off-the-plan concession.

Current state of play following the changes

The Victorian Government recently passed legislation which amended the "off-the-plan" concession so that it can only apply when determining if a transfer meets the strict dutiable value thresholds for:

  • a calculation of duty on certain transfers of real estate which will be used as a "principal place of residence" where the dutiable value does not exceed $550,000; and
  • an exemption on certain transfers of real estate to first home buyers where the dutiable value does not exceed $600,000; and
  • a concession on certain transfers of real estate to first home buyers where the dutiable value exceeds $600,000 but does not exceed $750,000.

The implementation of these changes means that the off-the-plan concession will no longer be available for any other acquisitions pursuant to off-the-plan contracts whether they are for residential or investment purposes.

Pre-1 July 2017 off-the-plan contracts

Importantly these changes do not apply to existing off-the-plan contracts signed before 1 July 2017 that have yet to settle.

The relevant amending legislation contains transitional provisions that effectively provide that any off-the-plan transfer that takes place pursuant to an off-the-plan contract signed before 1 July 2017 will be subject to the current off-the-plan concession provisions. This is so even if the pre-1 July 2017 off-the-plan contract settles on or after 1 July 2017.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.