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 the Victorian government offers stamp duty savings or concessions for some properties including off the plan units.
How to not pay 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 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-bed unit in Mooroolbark 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.
Have you ever enjoyed stamp duty savings from buying property off the plan?