Off-the-plan guide 2021: How does stamp duty work in Victoria?

Off-the-plan guide 2021: How does stamp duty work in Victoria?
Off-the-plan guide 2021: How does stamp duty work in Victoria?

When buying any home in Victoria, you're required to pay a stamp duty fee, which is a land transfer tax charged by the government. Aside from the benefits of buying a brand new house, significant savings on stamp duty fees have been known to attract many buyers to the new build/off-the-plan housing market.

Recently we caught up with real estate expert, Heath Thompson from Projects by Buxton Real Estate who gave us the low down on off-the-plan Stamp Duty, plus some of his top tips to help you save on your new home purchase.

Watch the interview:

Heath's advice: Choose the right solicitor, ensure you understand which stage of construction the development is at and undertake thorough research.

To assist you with your research, we've put together a guide to help you understand more about how stamp duty works in Victoria.

How much stamp duty do I need to pay on an off-the-plan purchase?

Sometimes different rules can apply to off-the-plan property purchases, including subsidies and exemptions. Particular off-the-plan packages will qualify for a reduced fee (concession) by deducting construction costs occurring on or after the contract date. This decreases the dutiable value. 

What is Dutiable Value?

Dutiable value is not necessarily the price you paid for the property. When purchasing off-the-plan, this value can be far less than the purchase price.

How do I calculate the off-the-plan concession?

Firstly, you need to make sure that you are eligible for a stamp duty concession.

Next, you need to work out which of the two methods of calculating the dutiable value are being used by the developer you are purchasing the property from, the fixed percentage method or alternative method.

Each method has its advantages and disadvantages depending on the individual property.

More information can be found at www.sro.vic.gov.au. 

Do I have to pay Stamp Duty fees if I am a first home buyer?

Currently (in 2021) stamp duty has either been reduced or removed for qualifying first home buyers to make it easier for buyers to enter the property market. Stamp duty fees have been removed for homes $600,000 or less. First home buyers (and other parties if a joint purchase) must also meet the First Home Owner Grant eligibility criteria.

Do I have to pay stamp duty fees if I am going to live in the home?

Often a stamp duty concession (not an exemption) will be applied to off-the-plan purchases where the dutiable value is under $550,000. However, there are stimulus packages from time to time which will increase this threshold. Eg. until 30/6/2021, the dutiable value is increased to $1m with additional stamp duty concessions. 

An increased dutiable value threshold is continuing from 1/7/2021 with specific details to be confirmed.

What are the stamp duty rules if you're an investor?

Investors are generally required to pay the full dutiable value of the off-the-plan property at settlement.

Keep an eye out for State Government announcements, as this could change.

When am I required to pay stamp duty when buying a home in Victoria? 

In Victoria, you're required to pay stamp duty fees within 30 days post-settlement.

Off-the-plan guide 2021: How does stamp duty work in Victoria?

CASE STUDY:

You purchase an off-the-plan home for $650,000 prior to construction commencing. This property is going to be your primary place of residence. After signing the contract, you're informed the build cost will be $480,000 for your new apartment. To calculate the dutiable value, you subtract the build cost from the purchase price ($650,000 - $480,000 = $170,000). The dutiable value of the apartment will be $170,000.

Source: VIC State Revenue Office - 8 June 2021

What happens if the construction has partially commenced?

A price of construction to date will be accounted for and added to the dutiable value.

Got any questions about stamp duty? Leave them in the comments section below and we'll find the answers for you.

Ready to search for property in Melbourne? You can browse the latest off-the-plan listings on the market here

Olivia Round

Olivia Round

Olivia Round is the Features Editor of urban.com.au. Olivia specialises in news reporting, in-depth editorial content and video + podcast interviews with industry experts.

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mary.seong
Can you help me to work out what is the dutiable Value for a first home buyer with interest in a town house advertised @ 1.099mil . My son has interest in the townhouse. He is a Kiwi living in Melb in the last 10 years.

Mseong

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