Buying property off the plan means entering into a contract with a developer to buy a property before the completion of construction. Since there is no physical property to inspect or see, you view the design, building plans and pictures to get an idea about what the property will look like on completion.

The contract of sale for any property should spell out what you are getting for your money. It is prudent to get your legal adviser to take a look over it before you sign it.

Usually the sales contract requires you to pay an initial 10 percent deposit of the purchase amount, which is held in a trust account. Then on completion of the construction, you must pay the balance and take possession of your new property.

An off the plan contract is drafted slightly differently from a standard property contract for obvious reasons – there is no physical property to exchange yet.

What is covered in an off the plan contract

It is important to check that the following things have been included in the contract:
▪ Adequate plan disclosure

In an off the plan contract, a developer is required to include plans, specifications, and timeline of what they plan to construct as the final product. It is important to review these plans so that you are satisfied with the level of disclosure and the standard of the finishes.
▪ Cooling off period

In most Australian states, a cooling off period of two to three days applies to an off the plan contract, which means you are free to alter your purchase decision during this time. Try to find out if there is any termination penalty if you decide to withdraw during this time. Remember, you are legally bound to buy the property when the period ends.
▪ Finance

Before buying off the plan in a new property development make sure you are fully aware of your financial position. If you are planning on borrowing money from a lender to buy your property make sure you check with them about how they treat off the plan sales. Most lenders have different policies and ways of dealing with off the plan sales. Check with your lender if you can get approval for financing before the completion of the project.
▪ Stamp duty
As a buyer, you must pay stamp duty on your property within the required time period. Check if you are eligible for any concessions or exemptions available to those who buy residential property. You may need to get some legal advice on how much you may need to pay or what discounts you could be eligible for. Further information about stamp duty discounts in Victoria can be found on the State Revenue Office website.
▪ Inclusions and warranties
Inclusions are basically all the things that will be included in your property when it is finished. You don’t want to buy a property off the plan and then find out it doesn’t include doors or windows! An inclusion list will cover all the things that will be built into your home or as part of the development. Common things are the type of doors, floors, benchtops, cupboards, paint colour, door handles, oven and much more. Make sure you are clear about what you are paying for and what you will get. You also need to confirm what warranties you might be covered by. In Victoria, a newly built home comes with a three month period where defects will be corrected. This might be doors that stick, windows that don’t close properly or other things that pop up after you move in. The house will also be covered by a builder’s warranty, so if there are serious structural problems you can get them fixed.
▪ Completion
The contract should identify the estimated time when the property should be completed. Make sure you understand what happens if there is a delay or if the project gets cancelled. If the project gets cancelled you should get your deposit refunded. The developer is usually able to cancel the contract if the plan of subdivision can not be registered within a specified period of time, commonly between 18 months and 3 years from the day of sale.

You should also be aware the timeframe for settlement once the property is ready for you to move in. Usually it is 14 days after completion.

When buying off the plan, it is important to closely review the contract details to make sure you understand exactly what you are signing up for, and also that you get what you pay for when the property is built.

Stamp duty is basically a tax on your property purchase and is often the biggest cost of buying a home. However, clever property buyers know that many state and territory governments offer stamp duty savings or concessions for some properties including off the plan homes. Generous grants are also available to first home buyers to help them cover the costs of buying a new property.

Stamp duty savings

You can often make substantial stamp duty savings if you buy off the plan. Some state governments in Australia offer bonuses and reductions or have reduced stamp duty to encourage new development. In Victoria, the full rate of stamp duty applies on fully built homes, however you can receive generous concessions when you buy off the plan. The further along the construction of the property the less the stamp duty savings you get.

Avoiding stamp duty

The simple reason that you get a stamp duty saving for off the plan sales is because at the time you enter into the contract the stamp duty is based on the value of the land and not the property (as the house is not built yet).

For example if you buy a $400,000 home in Victoria off the plan (before construction starts) you will be entitled to approximately $16,000 in stamp duty savings. Once construction starts you can then claim a percentage of the stamp duty savings depending on what stage of the construction you enter the sales contract.

According to the State Revenue Office of Victoria typically, for single storey developments, the following indicates the percentage of construction at the various stages:
– 15 per cent for base (slab/foundations etc)
– 30 per cent for frame
– 65 per cent for lock up
– 90 per cent for fixing
– 100 per cent for completion.

The exact amount of savings you make depends on the price you pay for your property as that is what it is calculated from. So to get the maximum savings you need to buy the property off the plan before construction has started.

The stamp duty concession is designed to help encourage new building activity and give home buyers a tax break.

First Home Owners Grant

In Victoria, if you entered a contract after 1 July 2013 to build or purchase a new home, a payment of up to $10,000 is available for eligible first home buyers.

The grant is designed to help buyers with the costs involved with buying a first home. The grant provides some financial support to help make it easier for people to buy their first home.

Coupled with stamp duty savings, first home buyers can get a great jump start into their first property, if they buy a home off the plan.

You can find out more about Victorian stamp duty savings and the First Home Owners Grant on the State Revenue Office website www.sro.vic.gov.au

Other stamp duty and concession links
• NSW – www.osr.nsw.gov.au
• QLD – www.osr.qld.gov.au
• SA – www.revenuesa.sa.gov.au
• TAS – www.treasury.tas.gov.au

Stamp duty is basically a tax on your property purchase and is often the biggest cost of buying a home. However, clever property buyers know that many state and territory governments offers stamp duty savings or concessions for some properties including off the plan units.

Avoiding stamp duty

The simple reason that you get a stamp duty saving for off the plan sales is because at the time you enter into the contract the stamp duty is based on the value of the land and not the property (as the house is not built yet).

If you buy a property after construction has started you will continue to get a percentage discount on the stamp duty
based on how much of the property is constructed.

According to the State Revenue Office of Victoria typically, for single storey developments, the following indicates the
percentage of construction at the various stages:
– 15 per cent for base (slab/foundations etc)
– 30 per cent for frame
– 65 per cent for lock up
– 90 per cent for fixing
– 100 per cent for completion.

So to get the maximum savings you need to buy the property off the plan before construction has started. The stamp duty concession is designed to help encourage new building activity and give home buyers a tax break.

The exact amount of savings you make depends on the price you pay for your property as that is what it is calculated from.

Saving $15,000 in stamp duty

For example if you paid $380,000 for an off the plan 2-bedroom property in Victoria you would be liable for around $15,000 in stamp duty. However, because you purchased the property off the plan you are only paying duty for the land value not the value of the property. This means you won’t have to pay the $15,000+ tax. That is a great saving to make, and puts you $15,000 in front.

There may be some other fees and charges that you do not have to pay or get a discount on, so the savings may be even greater.

Stamp duty saving is just one of the reasons smart property buyers look to buy new properties off the plan. You can find out more tips and information about buying property off the plan in our simple guide to buying property off the plan.

A series of videos also explains what is involved with buying real estate off the plan.

Stamp duty and concession links

• NSW – www.osr.nsw.gov.au
• QLD – www.osr.qld.gov.au
• SA – www.revenuesa.sa.gov.au
• TAS – www.treasury.tas.gov.au
• Victoria – www.sro.vic.gov.au
• WA – www.dtf.wa.gov.au
• Foreign purchasers – www.firb.gov.au

A new series of short videos will help property buyers boost their confidence through a greater understanding of the essentials of what is involved with buying property off the plan.

The series called the Simple Guide to Buying Property Off the Plan will be a useful resource for people who want to understand more about this way of purchasing property.

If you watch these videos you will have a great understanding of what it means to buy property off the plan and how you can get a jump start on other property buyers.

The series covers:

1. What is buying property off the plan?
2. Some of the risks in buying property off the plan
3. The four simple steps to buying property off the plan
4. Financial considerations and deposits
5. Buying in a multi-unit development and inclusions lists
6. How to make stamp duty savings
7. Understanding owners corporations.

You can also review a report copy of the Simple Guide to Buying Property Off the Plan and the helpful Off the Plan Checklist to ensure you consider all the key points before signing a contract of sale.

Have you successfully bought property off the plan before, let us know by leaving a comment below.