Introduction

On 21 October 2024, a new concession scheme was introduced for off-the-plan (OTP) property purchases within strata subdivisions. This concession aims to make OTP properties more accessible by offering significant savings on stamp duty. The concession will be available for OTP contracts entered into within a 12-month period from the effective date.

Key Features of the New OTP Concession

The new OTP concession offers several benefits that set it apart from previous concessions:

Deduction of Construction Costs: Purchasers can now deduct construction costs incurred on or after the contract date when determining the dutiable value of the property. This can lower the total stamp duty payable, resulting in substantial savings.
No Eligibility Restrictions: Unlike some previous concessions, this new OTP concession does not require eligibility for the principal place of residence duty concession or the first home buyer duty exemption/concession. This means that all purchasers—including investors, companies, and trusts—can benefit.
Removal of Construction Cost Thresholds: There is no longer a cap on deductible construction costs, providing more flexibility and potentially higher deductions.
Continuation of Existing Concessions: While the new concession offers broader accessibility, existing OTP concessions for owner-occupiers and first-home buyers remain available. Purchasers in these categories may be able to apply multiple concessions for added benefits.

Calculating Stamp Duty with the New Concession

Understanding how to calculate the stamp duty under this concession is essential. Here's a simplified guide to the process:

Determine the Contract Price (CP)
a. Includes land and construction cost
Calculate the Completed Construction Costs (CCC) by Contract Date
a. Total Construction Cost x Percentage Completed at Contract Date = CCC
Calculate the Dutiable Value (DV)
a. CP – CCC = DV
Calculate Stamp Duty (SD)
a. DV x 5.5% = SD

Example Calculation

(CP) Contract Price: $500,000
(LV) Land Value: $50,000
(TCC) Total Construction Cost: $450,000
(PCCD) Percentage Completed at Contract Date: 20%

Calculate Completed Construction Costs (CCC)
a. TCC x PCCD% = CCC / $450,000 x 20% = $90,000
Calculate Dutiable Value (DV)
a. CP – CCC = DV / $500,000 - $90,000 = $410,000
Calculate Stamp Duty:
a. DV x 5.5% = SD / $410,000 × 5.5%= $22,500

In this scenario, without the concession, the stamp duty would be calculated on the full contract price of $500,000, resulting in $27,500 in stamp duty. By using the concession, the purchaser saves $5,000.

Final Thoughts

This new OTP concession scheme represents a meaningful financial benefit for a wide range of purchasers. By allowing deductions based on completed construction costs and removing restrictive eligibility requirements, the scheme provides more opportunities for both first-time buyers and investors.

This inclusiveness not only helps investors find affordable entry points but also supports broader housing access for those entering the property market.

With growing property prices in urban areas, concessions like these can make it easier for middle-income buyers to participate in the property market. By reducing upfront costs, such policies could help more individuals and families achieve stable housing. While this initiative alone may not solve housing affordability challenges, it is a positive step toward reducing barriers to property ownership in the competitive urban housing market.

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This blog post provides general information and is not intended as legal advice. It may not be complete or up-to-date. For specific legal advice, please consult a qualified lawyer.