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Property professionals guide: Contracts for sale of land
Off the plan agreements and contracts
Understand the eligibility criteria and processing requirements to defer payment of transfer duty when buying off the plan.
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In specific circumstances, purchaser/transferees buying a residence off the plan may be eligible for a deferral of duty.
Transfer duty must normally be paid within 3 months of signing a contract for sale of land.
Section 49A of the Duties Act 1997 provides for up to an additional 12 months to pay transfer duty for eligible off the plan contracts where a residence has not yet been constructed and no purchaser/transferee is a foreign person. After completion at least one of the purchaser/transferees must use and occupy the property as their principal place of residence for a required period of time, as specified in the resident requirement below.
For the purposes of Section 49A, an off the plan purchase agreement/contract means an agreement for the sale or transfer of dutiable property, being land on which a residence is to be erected or developed before completion of the agreement for the sale or transfer.
An off the plan contract defined in Division 10 of the Conveyancing Act is different to the definition of an off the plan purchase agreement under section 49A of the Duties Act 1997.
When does liability arise?
Liability for duty on an eligible off the plan purchase agreement arises on whichever of the following occurs first:
on completion of the agreement (settlement), or
on the assignment of the whole or any part of the purchaser’s interest under the agreement, or
on the expiration of 12 months after the date of the agreement, whichever first occurs.
To be eligible for the deferral of duty the following eligibility criteria must be met.
Eligibility Criteria for off the plan agreements
Purchaser/transferees eligibility
No purchaser/transferee under the agreement can be a foreign person.
At least one of the purchaser/transferees must use and occupy the property as their principal place of residence for a specified period of time. The following residency requirements must be met.
For contracts exchanged on or after 1 July 2023
At least one of the purchaser/transferee’s must:
move into the residence within 12 months of the completion of sale or transfer, and
use and occupy the property as their principal place of residence for a continuous period of at least 12 months.
For contracts exchanged before 1 July 2023
At least one of the purchaser/transferee’s must:
move into the residence within 12 months of the completion of sale or transfer, and
use and occupy the property as their principal place of residence for a continuous period of at least 6 months.
Members of the Permanent Forces of the Australian Defence Force
For transactions entered into on or after 19 May 2022, the Duties Act 1997 exempts defence force personnel from the residence requirement where:
at least one of the purchasers or transferees is a member of the Permanent Forces of the Australian Defence Force, and
each of the purchasers or transferees is enrolled to vote in NSW State elections under the Electoral Act 2017.
Ineligible off the plan agreements
The off the plan deferral of duty is not applicable to the following transactions:
the purchase of vacant land
the purchase of commercial property.
The off the plan deferral of duty is not available to purchaser/transferees who are:
non-individuals - Companies, partnerships, and individuals purchasing in their capacity as trustees
investors who do not meet the residence requirement
foreign persons – who have a surcharge purchaser duty liability (within the meaning of Chapter 2A of the Duties Act). No purchaser/transferee under the agreement can be a foreign person.
The deferral of duty provisions under this section does not extend to:
Here are five common situations relating to off the plan agreements.
Scenario 1
Purchaser A (an Australian citizen) has purchased an off the plan residential unit and deferred the payment of duty. At the time of paying the duty they declared they were going to live in the property. They have since changed their mind and are not moving into the unit. Do they need to notify Revenue NSW? Will interest or penalty tax apply?
Yes, the purchaser will need to notify Revenue NSW so that the liability can be reassessed.
Duty was payable within three months of first execution. If duty was not paid within this timeframe, a tax default has occurred. Interest will apply from the date of the tax default until the duty is paid. In addition penalty tax may also be applied to the duty payable.
Scenario 2
Purchaser A and Purchaser B (Australian citizens) have bought an off the plan office space and intend to set up their conveyancing practice. Are they eligible for the off the plan deferral of duty?
No, the off the plan deferral is only available when a residence is to be erected or developed, not a commercial property.
Scenario 3
Purchaser A and Purchaser B (Australian citizens) are buying vacant land that will not be registered for 11 months. They intend to build a house and it will be their principle place of residence. When is duty payable?
The off the plan deferral of duty is not available for a vacant land purchase. Duty is payable within 3 months from the date of the agreement/contract.
Scenario 4
Purchaser A was born overseas but has an Australian Permanent Visa and has not lived in Australia for 4 years. Contracts were exchanged on an off the plan residential unit that will be completed in 6 months. Once it is completed, the purchaser will return to Australia and live in the unit.
Are they eligible for the off the plan deferral of duty?
No, the purchaser will not meet the ‘ordinarily resident’ 200 day criteria. They must have been in Australia for 200 days or more within the 12 months immediately prior to the liability date of the contract, therefore the purchaser is considered a foreign person.
The purchaser may also have to pay surcharge purchaser duty. If duty is not paid within three months, interest on transfer duty and surcharge may also be payable.
Scenario 5
Purchaser A and Purchaser B were foreign persons when the contract was exchanged for an off the plan residential unit to be completed in 3 years. Once the unit is completed, the purchasers intend to live in it.
They expect that they will have permanent residency at the time the unit is completed.
Are they eligible for the off the plan deferral of duty?
The off the plan deferral of duty is not available. At the liability date (date of contract), all purchaser/transferees must be Australian Citizens or permanent residents who are ordinarily resident.
Duty is payable within 3 months from the date of the agreement/contract.
Lodgement requirements
Most off the plan transactions under this section can be processed on Electronic Duties Returns (EDR).
If the purchaser is eligible for the off the plan deferral of duty under section 49A of the Duties Act 1997 the contract must be processed under the document type:
Agreement for sale of land – off the plan, or
First Home Buyer – off the plan (for First Home Buyers Assistance Scheme applications)
If the property being acquired is an unregistered plan, when entering the property details enter the parent title details.
