Sunset Cause: What, Why, Who, When & How?

Daniel Chadrawy on June 20, 2022

Buying property can be stressful if you go on the journey without guidance. Financial and emotional investments are at stake, and there are a lot of things that can go wrong. For that reason alone, it’s unlikely to come across a real estate article that does not mention the importance of research for buyers.

Whether you’re buying your first home or an investment property, It’s essential to know everything listed in the contract of sale and how it might affect you.

Here, we look at the sunset clause for off-the-plan properties, its risks, and how you can make it work for you.

What is a Sunset Clause?

Sunset clauses are contract terms that effectively limit the time during which a contract remains valid. If the settlement has not taken place by the end date specified in the clause, both parties may walk away from the agreement. The buyer would receive their deposit back in full in such a scenario. Essentially, the sunset clause protects buyers from financial exploitation.

An average sunset clause period is around 18 months for off the plan sales. In some cases, the sunset clause deadline can be extended after being agreed upon after seeking legal advice.

The sunset clause is intended to provide security and protection for the buyer! In this article, we’ll explain what sunset clauses are, what they do, how they protect you (the buyer), what to watch out for, and how the most recent legislative changes affect you.

Why are Sunset clauses used?

The contract sunset clause is designed to protect the buyer and/or seller by letting either party walk away from the contract if the agreement requirements are not met by a specific date.

Sunset Clause when buying off the plan property

Sunset clauses are always included in off-the-plan property contracts. In this context, the clause states the date the developer must complete the project. It also states that if the property isn’t completed by the agreed-upon date, the buyer is legally entitled to walk away from the contract and receive their full deposit back.

Usually, the project is finished well before the date outlined in the clause, as developers exaggerate the time frame. This allows for delays either caused by weather, supply issues, or industrial actions.

For example, a contract between both buyer and developer would stipulate when the developer must finish the project – let’s say 16 August 2022. In scenario one, the deadline date would come around, and the developer has completed the project, so the sale & settlement can be finalised. But in scenario two, the buyer may find that the developer hasn’t met the sunset clause obligations and the project wasn’t completed by the deadline. The buyer decides to terminate the contract or extend it if that is an option for them.

Who do sunset clauses apply to and when can they be used?

The use of the clause is open to both the buyer and the seller, and either party can choose to invoke the clause if the expiry date has passed.

However, in some cases, the clause may be more challenging to invoke for one party than the other. In some states, legislation has been passed to make it more difficult for developers to invoke the sunset clause.

There were instances in the industry where some developers used the clause to purposely stall development until after the sunset date had passed so that they could relist the property for a higher price after the date had passed. This can no longer happen with the newer legislation in place.

How do sunset clauses help sellers?

The sunset clause benefits both the buyer and seller regarding the construction of new properties.

A developer can use a sunset clause if the delays are genuinely out of the builder’s control. Suppose there are time limits that are generally out of their control. In that case, they can be released from their buyer without any legal implications.

Can a sunset clause be extended?

Yes, they can. It is possible for the parties involved to reach a mutual agreement to extend the term of their current sunset clause. To do this, legal advice should be sought before extending the sunset clause. The clause will continue on the new agreed-upon timeframe of completion.

However, if new requirements for the contract still haven’t been met, both parties would have the option to invoke the clause and walk away.

How do Sunset clauses benefit the buyer?

Despite the recent negative media around sunset clauses, they can work in your favour as the buyer. The clause is a valuable get-out-of-jail-free card that you can pull out of your pocket when deadlines are missed.

Compared to many House & Land Contracts that shift all risk onto the buyer, this sunset clause is there to protect you. In this instance it is the protection of time and deliverability, but it also locks in your purchase price without the developer being able to ask for more money. In the case of House & Land, many contracts are written so the builder can force the buyer to pay more as costs increase over time.

Before you sign a contract for an off-the-plan purchase, you should always speak with your solicitor to read the clause and also assess your personal situation to ensure the timeline suits you should the project be delayed until the given sunset date.

Legislation

Due to the widespread abuse of the Sunset Clause throughout the states, new legislation has been implemented to protect buyers buying off-the-plan property.

A few states of note are;

NSW: The New South Wales government created a legislation amendment known as ‘Conveyancing Amendment (Sunset Clauses) Act 2015’ and is quoted as the below:

An Act to amend the Conveyancing Act 1919 to prevent a developer from unreasonably rescinding an off the plan contract for a residential lot under a sunset clause.

VIC: The Victorian government followed NSW’s lead. In 2019, they updated their legislation to close the loophole that previously allowed developers to exploit these clauses by intentionally delaying building projects to influence buyers. This is known as the ‘Sale of Land Amendment Act 2019’.

ACT: In 2021, The ACT government created the legislation, a blend of VIC and NSW laws, to better protect home buyers. These changes included an obligation to give buyers a 28-day notice of intent to revoke a sale, to which the buyer must consent. This is known as ‘Civil Law (Sale of Residential Property) Amendment Bill 2021’.

Even though state governments are trying to stop buyers’ financial exploitation, unfortunately, the Queensland government is yet to catch up with any sunset clause legislation updates. In recent months, Queensland’s property laws have come under fire as more developers use sunset clauses to cancel contracts and leave would-be first home buyers priced out of the market.

Luckily, there is some good news! Queensland Attorney General Shannon Fenitman stated that Queensland’s property rules are now under review. “We are rewriting the entire Property Law Act right now in Queensland [and] it’s been a long time coming,” Fenitman said. Fenitman hopes to have this legislation in the Queensland parliament at the end of this year.

What does the new legislation mean for buyers and sellers?

Developers now need to provide buyers with a 28-day notice and an explanation of why they cannot meet their contractual obligations. A seller needs to specify why the completion of the project cannot be completed as the clause stipulates.

Suppose a buyer disagrees with the developer. In that case, the seller will need to obtain an order from the Supreme Court to revoke the sunset clause. They are now liable for any legal fees they may encounter. This means a developer can no longer cancel a contract if the timeframe outlined is not met in the sunset clause.

This is excellent news for buyers! As it adds extra security for buyers, knowing that the developer has to comply with the new legalisation.

Final Thoughts

When purchasing a new property, you need to do your research, not just of the developer.

Lucky for you, we have done all the hard work for you and can provide all the information you need to make an informed decision.

Liviti’s tips to making the most of EOFY

Daniel Chadrawy on June 20, 2022

As the End of the Financial Year (EOFY) approaches rapidly, you could enjoy a cash boost if you know what to include in your tax return. We’ve put together a checklist to maximise tax time benefits!

We know that declaring taxes can be overwhelming and confusing. To make your life a little easier, we’ve created a guide to help you.

People often fail to realise that their income does not always depend on their employer or regular income. Some other sources of income that are sometimes overlooked are:

Lump sums
Termination payments
Bank interest earned
Dividends
Employee share schemes
Rental income
Capital gains
Cryptocurrency gains

So why is it important to factor in all forms of income? It is important to declare all income streams as the ATO will ask you to pay your outstanding tax liabilities plus interest on late payments and any other penalties you may have.

Now that we’ve covered what streams of income you should declare, let’s move on to what you’re really here for – tax deductions.

Deductions can be one of the most confusing and debated areas of tax returns. Deductions can be expenses you’ve paid, though are not being reimbursed through your income. These might include:

Home office expenses – furniture, lighting, stationery etc
Self-education and professional development
Tools, equipment, uniforms, protective clothing
Work-related deductions – public transport costs, petrol costs
Investment income, expenses, such as margin loans and financial adviser fees
Even donations above a certain amount!

Now, we covered a few items you might be overlooking when filing your tax return. Let’s explore how Covid has affected your tax return and what you could include to maximise your tax return this year!

How do the impacts of Covid-19 affect the Financial Year?

Since Covid-19 has shaken up routines and how we work, the ATO has made it easier to claim deductions that reflect our new working environment. Some of these home office expenses include:

Phone and internet
Cost of heating, cooling and lighting of the office space
Printing and stationery
Equipment – laptops, monitors, keyboards, mice, printers and furniture

So does owning a property impact your tax return?

One benefit of investing in property may allow you to claim several specialised tax deductions you can choose to declare, which include;

Repairs and maintenance fees
Interest charges & upfront costs on your home loan – such as establishment fees, stamp duty and Lender’s Mortgage Insurance (LMI)
Home insurance
Strata fees
Negative Gearing: If your property is negatively geared, you can offset your loss against other taxable income, such as your salary, to reduce your overall taxable income for that year. Despite your loss in principal, your home should still increase in value over time, meaning you could still profit from selling it.

Your property is positively geared if you earned more income than you spent on expenses in the financial year. In this case, you may be subject to tax on your property income. But if you spent more on fees than you received in revenue, your property could be negatively geared, which would reduce your taxable income.

Some property investors choose a negative gearing strategy to help them enjoy tax benefits in the short term and count on the property’s capital growth to make up for losses over a longer period.

Other things you should consider when maximising tax returns on investment property are:

Capital improvements you’ve made over the financial year
Selling a poorly performing investment that no longer meets your needs to offset the capital gain from an investment you made during the year. In addition to triggering a capital loss, you may also be able to invest in new investment opportunities, allowing you to reduce your tax liabilities.

Maximise your tax return with these tips above. Making the most of your yearly tax return can help you reach your goals sooner, whether saving for a property or paying down debt.

Booking a Discovery session with us and we’ll tailor a property investment strategy to help you minimise your tax and maximise your tax return through these reductions. You can contact us to find out more!

How Does Capital Gains Tax Work When Buying Or Selling Off-The-Plan

Daniel Chadrawy on May 13, 2022

Ugh. Taxes. They’re not everyone’s best friend.

They are, however, a part of life. Ben Franklin once noted that in this world, nothing can be said to be certain, except death and taxes. Ben Franklin died in 1790. Over 200 years later, we’re still dealing with taxes. He was certainly on the money (pardon the pun).

We digress, the real reason we’re here today is not, in fact, to whinge about taxes behind their back, but to inform you of the ins and outs of capital gains tax (CGT) when it comes time for the purchase or sale of an off-the-plan property. Understanding how CGT works now will help you later on when it comes time to complete your tax return after you sell.

Keep reading this article to learn about capital gain, capital losses and how off-the-plan investment properties offer a range of benefits, even when CGT is taken into account.

What Is ‘Off-The-Plan’?

Essentially, buying off-the-plan means you’re buying a property while it is still in the planning, development or construction stages. As the purchaser, before you sign the contract, you will generally be able to see a floorplan and the location of the property, as well as having some input into appliances, colour schemes and fittings, but not too much else until you settle.

How Does ‘Off-The-Plan’ Work?

Off-the-plan investors will generally be up for a deposit of around 10%-15%, but in some circumstances, it can be as low as 5%.

The balance is then paid only once the property has been fully constructed, which poses quite a few advantages to buyers.

Considering it can take 12-18 months for an off-the-plan property to be ready for settlement, this allows the purchaser more time to save before payments like stamp duty buying fees is required. On top of this, the far-off due date allows an extended period to act if you’re attempting to find a buyer for a property you currently own to fund the purchase of your new investment.

As a prospective off-the-plan buyer, it’s generally not too hard to find more information about the contract the deposit and everything in between, if you know where to look. (the Liviti website is a great place to start).

What Does It Mean To Pay Capital Gains Tax?

Alright, we’re back to the nitty-gritty tax talk. Bear with us here. It may be boring, but it’s important to know this stuff before entering into an off-the-plan contract you plan to sell in future.

Capital gains tax is managed by the ATO, calculated as part of your income tax and is applicable to all properties (with one or two exceptions, but more on those later in this article).

CGT applies to properties acquired post-1985, as this is when CGT was introduced.

For taxpayers, CGT is applied to any capital gains you’ve made within the financial year. A capital gain refers to a profit made on the sale of any assets.

Sale Price – (Purchase Price + Costs) = Profit.

For example, if you purchase a home for $500,000, sell it for $800,000 and incur $50,000 worth of costs in the process of buying, owning and selling it, your profit would work out to be $800,000 – ($500,000 + $50,000) = $250,000. That $250,000 is what you would pay CGT on.

What Is The Ideal Amount Of Capital Gain Tax?

It’s important to realise that there really is no specific capital gains tax amount that is ideal, on the whole. It truly does depend on individual circumstances.

As your capital gain increases, your capital gain tax will also increase and will depend on factors like the amount of time you’ve owned the property, your marginal tax rate, and more.

How To Calculate Capital Gain Tax

We’re going to try and simplify this as much as we can because nobody wants to spend time reading tax info. Here goes…

By law, you pay CGT as part of your annual income tax. Essentially, there’s no specific CGT tax rate applied, but the tax rate is subject to your total income which will include any applicable capital gains (or capital losses).

Here are a few examples of different ways one might complete their CGT calculations…

1. Discount Method

This method allows you to reduce your capital gains if you sell the asset after a period of more than 12 months of holding it. A discount of 50% may be applied in this case.

So, if you make $205, 000 profit, you would only pay CGT tax on the $102, 500 gained.

Follow this formula…

Asset Sale Price – Cost Base = Capital Proceeds
Capital Proceeds x 50% = Capital Gain

2. Indexation Method

This allows you to increase the cost base by applying an indexation based on the Consumer Price Index (CPI), up to September 1999.

Follow this formula…

CPI for Quarter of CGT Event ÷ CPI for Quarter when Expenditure Occurred = Indexation Factor
Capital Proceeds x Indexation Factor = Capital Gain

No matter how you plan on calculating CGT, it’s super important to consult with a tax specialist so you don’t end up with the tax department hot on your heels.

Capital Gains Tax For Foreign Residents

If you are a foreign resident and an investor in off-the-plan property in Australia, your CGT calculations will slightly differ.

You will be required to pay GCT on taxable Australian properties that you sell, worth more than $750,000.

Unfortunately, some CGT exemptions and discounts will not be applied. For example, when being taxed you will likely not be eligible for the 50% CGT discount when you make a capital gain after holding the property for more than 12 months (unless you purchased the property before 8th May 2012).

The good news is that any assets signed over to you in an acquisition before CGT started on 20 September 1985 are not subject to it when re-sold.

Tax Planning For Off-The-Plan Apartment Purchasing

When it comes to tax for off-the-plan apartments, it’s important to know how CGT might affect the property before settlement and eventually when the property is sold.

Having a plan for the method of CGT you or your tax agent is likely to use when the time comes is good to know from the get-go.

Certain items can be used to make tax deductions and work to lower CGT including rental advertising, interest on the loan, strata fees, stamp duty, depreciation and repairs/maintenance, so keep these in mind.

Again, it is so important to contact a tax specialist to make sure you’re able to take advantage of these tax benefits before purchasing off-the-plan property in Australia.

How Can You Avoid Paying Capital Gains Tax?

Often, by making the property a principal place of residence (PPOR), investors can get away with not being taxed for GCT.

Here’s the deal…

The property must have a dwelling on it and it must be your PPOR, meaning it is where you live, where your personal belongings are, where your mail is delivered, etc.

An exemption is available if PPORs eventually become a rental property, as long as it sells within 6 years of becoming a rental AND no other property is listed as your PPOR. If you reoccupy the property as a PPOR before the 6 years is up, the exemption resets.

As for discounts, investors who have held an asset for more than a year-long period may be eligible for a 50% discount on capital gains tax once its sale is completed. There’s also the possibility of tax discounts if the property is purchased by a self-managed super fund.

Again, all of this is dependent on circumstances. Please seek expert advice before agreeing to a contract, paying a deposit or planning a sale.

Selling An Off-The-Plan Property Before Settlement

Can You Sell Off-The-Plan Properties Before Settlement?

Yep! Off-the-plan properties often provide the opportunity within the contract to re-sell in the time period before settlement which is an awesome advantage to buyers.

If circumstances change prior to settlement, you may be able to sell up and hand the signed agreement over to a new buyer (kind of like when you have a gym membership and you literally never go so you find someone else to take over the contract instead…yeah, we’ve all been there).

Making a tidy profit from pre-settlement sales is possible if you’re clever about it.

How To Sell Off-The-Plan Property Before Settlement?

Firstly, consider whether the developer will allow a re-sale on an unconditional contract prior to settlement. Always check the fine print in the contract and have a legal expert confirm whether a re-sale is possible.

Once the legal stuff has been a-okayed, here are a few tips…

Timing is key! Try and allow at least 6 months from the expected completion date to give the property a good chance at selling before it’s due to settle.
Hire an agent to market the property for you. They can promote through their website, sales agents or online platforms!

Things Consider When Selling An Off-The-Plan Investment Property Before Settlement

If re-selling prior to settlement, it’s important for investors to consider the need to pay stamp duty when the property is re-sold, cover any additional legal fees for solicitor services and marketing fees if you use an agency, plus, our old friend CGT will rear its ugly head in the same tax period.

Most importantly, remember that you do remain bound to the developer after signing if no other buyer will take on the title.

Where To Find Information On Capital Gains Tax Selling Off-The-Plan?

As always, a qualified tax agent or solicitor is your best bet for feedback on the nitty-gritty stuff, but if you’re still confused about any aspects of CGT and buying/selling an off-the-plan property, don’t hesitate to get in touch with our team here at Liviti.

You can get in contact with us or view our available properties.

Remember, CGT might suck but it doesn’t have to be hard to manage if you work with the right people.

Dual Key Apartments: Are They A Smart Option For You?

Daniel Chadrawy on May 13, 2022

With the price of houses on the rise in the Australian market, it can be disheartening for bright-eyed and bushy-tailed investors who are new to the property scene to constantly be outbid at auctions. We know how hard it is right now to find investment opportunities within a certain range of affordability that will actually provide a decent return on investment.

The reality is that no matter how high housing prices soar, people still need a roof over their heads and there is always an alternative opportunity for those willing to take a different route.

One of the most commonly overlooked ways to break into the investment market is by placing your funds and your faith (with research to back it, of course) into a dual key apartment. Ok, so, why not just buy a house with a granny flat or invest in a humble duplex? Sure, they are both similar options, but a dual occupancy apartment does offer quite a few benefits that a granny flat or duplex simply cannot provide.

Let’s chat more and we’ll see if becoming a dual key apartment property investor is a smart option for you and your circumstances.

What Is Dual Key Apartment Ownership?

By purchasing a dual key apartment you’re essentially making a property investment that boasts two separate living spaces contained within a single apartment. Some might even say that you’re getting two properties for the price of one.

This can obviously pan out to be an amazing opportunity for investors, whether the home is purchased with the two separate properties already sectioned, or if the plan is to renovate to make it so. Kind of annoying that you need strata/council approval to renovate an apartment, but at least there’s a chance, right?

The main benefits do stem from the fact that dual key apartments are typically self-contained with a kitchen, separate bathroom, separate living space, and bedroom or bedrooms divided into two fully functional living quarters. The occupants will generally only share a front door and foyer, sometimes, not even that.

Why Are Dual Key Apartments On The Rise?

The main reason these types of properties are in high demand is that urban areas are experiencing a lack of space to build, but demand for housing is rising. Essentially, people need living spaces and they need them now. The rate at which we’re constructing residential buildings is struggling to keep up with the number of people who want to live in cities.

An investor with a keen eye can benefit from this need for urban living without having to buy multiple properties. Dual key apartment property investment allows a property owner to take advantage of a two-for-one deal. They can own two income-producing properties in just one space. In this economic climate, even Bunnings would struggle to offer that kind of value.

What Is The Difference Between A Dual Key Apartment And A Duplex?

Though duplexes and dual key apartments do have some similarities, they’re more like cousins than siblings, with quite a few integral differences to consider.

Duplexes are two attached dwellings, both with their own claim to the title of ‘main property’. A duplex can also have two separate owners for each property, whereas a dual key apartment is owned by a single property investor.

Dual key properties are contained within one space, for example, an apartment, whereas a duplex is two completely separate properties with separate access points that may share a common boundary.

A dual key apartment might have a shared front entrance or be connected by a shared foyer with two lockable doors through which the residents can enter and exit, but sometimes a separate access point is included.

It is quite common for dual key apartments to be presented in a multitude of layouts, often located in high-rise apartments; they could be mirrored units, or have one or two bedrooms in one half of the space and a studio apartment in the other half. The floorplan opportunities are endless!

Advantages vs Disadvantages Of Investing In A Dual Key Property

Advantages Of Investing In Dual Key Apartments

1. Potential To Receive Dual Incomes

The fact that a dual key apartment is listed on one single title under a single home loan opens the door to massive income potential and decreases outlay for property investors. Unlike duplexes, in which properties are on separate titles, a dual key home can allow for two rental incomes through dual occupancy within one apartment.

High rental income and the potential for positive cash flow are huge benefits for property investors aiming to achieve higher profits.

2. Live In One, Rent Out The Other

Trying to decide whether to buy an apartment and live in it or rent it out? Porque no los dos? *cue cheers*

With a dual key apartment, you, as the investor, can live in one part of the property and rent out the other. This can help subsidise loan repayments and boost cash flow while giving you a platform to break into the investment market and gain valuable experience. You get the best of both worlds, all in one!

3. Care For Family Members By Keeping Them Close By

As we get older, our parents and grandparents age too. Sometimes an elderly relative may need us to stay close in case of emergencies or just to help with tasks they can no longer carry out themselves. The same goes for family members with disabilities who may need a helping hand.

Residing in a dual key apartment together allows a family to stay close, while still offering a tremendous amount of privacy, freedom and space to all parties involved.

4. One Set Of Fees And Enticing Tax Benefits

Purchasing one property and incurring a single set of fees is definitely a drawcard for investors. With a dual key property, strata fees are generally much more streamlined as you are only paying for one property, rather than two dwellings or more.

The benefits also flow into other areas like council rates, as well as decisions made around approving mortgages and home loan considerations. Honestly, this can result in a big win for owner-occupiers who are looking to offset fees like property management costs and mortgage payments against rental income.

Now, let’s talk tax. Because dual key apartments are a relatively new innovation in Australia, you can generally take advantage of depreciation when the tax man comes knocking. Not a bad way to celebrate the end of the financial year!

5. Ability To Provide Affordable Housing For Students

Not only does it feel good to provide affordable housing opportunities, but it’s also nice to offer students a private place where they can live and study off-campus, away from distractions, without having to pay a fortune.

Students see the benefits of living in dual key properties and will likely be attracted if the residence is located close to their university campus with nearby access to public transport.

6. Ability To Convert Back To A Single Dwelling

As the owner, you may wish, after some time, to convert the dual key property back into a single residence.

The best part about dual key apartments is that the floorplan is almost always simply a single apartment layout divided into two dwellings. This often makes the renovation process as easy as knocking down a few walls to open the space up and turn two apartments into one.

It’s the perfect opportunity for an investor who plans to retire to their investment property or convert it into a larger single dwelling to create extra space.

There is a catch to this, though! You must gain strata/council approval for reno plans. You can’t just go knocking walls down willy nilly, because it could affect the stability of the entire building, not to mention annoying neighbours with the noise.

Disadvantages Of Investing In Dual Key Properties

1. Possibility Of A Premium Price Tag And Potential For Lower Buyer And Tenant Demand

Due to dual key homes being a recent emergence on the market, investors may end up paying top dollar. (Not always!) Though this generally isn’t an issue in the long run as the property sees capital growth, it can be problematic upfront.

A diverse rental market is something investors also have to contend with. Dual key properties are typically used as combination rental properties and owner-occupied spaces, thus may not draw in buyers who are not owner-occupiers, or renters who prefer more traditional property types.

2. Capital Growth Numbers May Be Limited Due To Small Resale Demand

Dual key homes may offer limited capital growth as they cannot be sold individually, due to being listed on only one title. Though owning dual key properties is a great property investment opportunity for those who wish to grow their portfolio, it can limit the market to buyers who are solely interested in dual key homes. This pool of buyers certainly isn’t as broad (yet!) as the pool for, say, a regular apartment or a house.

Many investors often prefer to purchase two separate units as they may be able to increase resale value and there could be potential for more flexibility with the rental return.

3. Stricter Lending Requirements

As an investor, you may have to contend with different requirements when applying for your loan. You may have to provide a greater deposit than you would on other properties, due to a reliance on a higher rental income.

Most other property types do not have this requirement for greater deposits when it comes to home loans. This can also cause limited appeal for owner-occupiers, as a larger deposit may not be achievable depending on the financial situation of the individual.

Should I Buy A Dual Key Investment Property?

The Australian market is in high demand for rentals, and dual key homes are a way to provide affordable housing while benefiting investors (like you!).

As with all property types, there are pros and cons involved with a dual key investment property. High-income-producing properties are a massive plus, for sure, but the need for a greater deposit may push out those looking to break into the property market. The ability to owner occupy, potentially receive a rental return from an additional dwelling, and essentially own two units in the one property is very appealing for those new to investment properties, however, having to sell the property as a whole rather than separately due to only having one title is not always ideal.

Ultimately, the decision to buy or not to buy is up to the individual and whether this type of property is an appropriate choice for an investment, considering all circumstances.

If you have a strong preference for purchasing a dual key apartment, we are more than happy to help you find the perfect property, or even just to talk it out to make sure it’s the right option for you.

Feel free to check out our blog for more articles or contact us directly!

Buying Off the Plan Properties: 7 Powerful Concessions to Save Big on Stamp Duty

Daniel Chadrawy on May 6, 2022

When it comes to off the plan concession offerings, quite a few benefits are available to purchasers who qualify for them, making them an attractive opportunity for all kinds of buyers.

One of the most popular off the plan concession opportunities involves acquiring a stamp duty concession. Generally, these concessions will benefit first homeowners and purchasers who intend on living in the home.

What Is An Off The Plan Transaction?

Buying a property off the plan means you are entering into a contract for property purchase before the construction of the property has commenced or while construction is in progress.

An off the plan transaction could refer to land that is going to be subdivided, an apartment, a townhouse, or a range of other dwelling types. Land, in itself, does not qualify.

Off The Plan Stamp Duty Concessions

Taking advantage of available benefits is a huge incentive for home buyers, especially ones that allow a reduction to the upfront fees required to secure a home.

What Is Stamp Duty?

Also known as transfer duty, this is one of the bigger costs to be accounted for. It is the tax that the Government imposes when you purchase a property at a particular value, or when the ownership is transferred. Unlike land tax, you only pay duty once.

It is calculated according to the total dutiable value of the property.

Simply match up the purchase price of the property you’re considering with the dutiable value information in the table below for NSW rates on owner-occupied or investment purchases. It’s easy enough to find information for other states via Google.

What Off The Plan Concession Is Available With Stamp Duty?

It’s no surprise that Australian stamp duty concession availability and eligibility vary between states.

In NSW, this concession works by pushing the duty payment due date 12 months into the future (ahead of the standard 3-month timeframe), or until the property has been officially handed over, whichever comes first.

In the ACT, if your contract was exchanged between 1 July 2021 and 31 March 2022, no duty applies to off the-plan unit owner-occupier purchases up to $500,000. This was then increased to purchases up to $600,000 as of April 2022.

There are quite a few first home owner concession opportunities including the First Home Buyer Assistance Scheme in NSW which may apply according to the dutiable value of off-the-plan properties.

Honestly, we’re chuffed just thinking of all the smashed Avo on toast those savings could buy!

Who Is Eligible For Off-The-Plan Concessions?

In NSW, in order to be eligible for stamp duty concession, the off-the-plan property you intend to purchase must be a residential property that at least one purchaser intends to live in as a principal place of residence for 6 months continuously, within 12 months of purchasing the home.

You must also be an Australian citizen OR a New Zealand citizen with a subclass 444 visa having lived in Australia for over 200 days in the last 12 months OR a permanent resident who has lived in Australia for just as long to be eligible.

If any residence requirement is not met, purchasers may need to pay a penalty tax.

How to Apply for Off-The-Plan Stamp Duty Concession

Currently, the State Revenue Office manages concession applications relating to first home buyer off-the-plan purchases in NSW.

Here’s your step-by-step action plan for applying…

Do your own thorough research before applying
Confirm your Australian citizenship status and other personal conditions meet the application requirements
Complete and lodge your application accurately and with supporting evidence

You can find further information and access the application form here.

New Requirements For Off-The-Plan Contracts To Know Before Your Contract Date

Prior to the date of the contract, check out the new requirements put into place in NSW from December 2019.

These new laws were added to create more disclosure obligations on vendors so that purchasers have more transparency throughout the buying process.

As a first home buyer, purchasing a residential property, like a new apartment, off-the-plan can offer some pretty sweet benefits, but please do keep in mind that suitability will always depend upon the individual circumstances of the purchaser.

Contact one of our expert property consultants at Liviti to help answer any of your questions or take a look at our latest off-the-plan properties available for purchase.

Happy house hunting!

Is stamp duty payable on off the plan purchases in NSW?

It certainly is! Unless you meet any of the concession options mentioned in this article, your stamp duty payment will be due within 3 months of the completion of the transaction.

Real Estate Terminology

Daniel Chadrawy on March 30, 2022

Have you ever found yourself in a conversation about the property and just being flat out confused? We get it. Real estate terminology can be tricky to wrap your head around.

Understanding real estate terminology is the easiest way to be as involved as you can in your property search and avoid any nasty surprises. Of course, it is always a good idea to consult a legal professional during this process but having a good foundation on some of the terms that may appear frequently is definitely helpful.

We have curated a list of real estate terms that may pop up here and there. Feel free to use this as your own little dictionary if you encounter any terms you don’t understand on your property journey!

There are plenty of handy terms in here that you may need to know and understand PLUS more to come. So we suggest bookmarking this so you can come back to it at any point with ease.

TOP TIP: if you’re looking for a particular term, don’t want to scroll on and on and on, simply press Ctrl + F (Windows) or Cmd + F (Mac) to find it quickly. If you’re using a mobile phone click share and then ‘Find On Page’. It really is that easy!

A

A/C

An abbreviation for Air-conditioning that is placed inside of the property. It can be in the form of fixed A/C or ducted A/C to control the overall temperature of the building.

Adj

An abbreviation for Adjacent is used to compare specific features and benefits that are next to or adjoining something else.

Amen/Amenities

An abbreviation of Amenities, this is a feature of a property that makes it more valuable to potential buyers. These features can be both internal amenities and external amenities.

Internal Amenities – features offered and placed in the building.
External Amenities – features and services within close proximity to the building.

Apartment

A room or set of rooms fitted especially with housekeeping facilities and maintenance facilities like strata that are in charge of maintaining the complex to which that apartment is a part and usually leased as a dwelling.

API

An abbreviation for the Australian Property Institute, they are regarded as the industry voice for property professionals with essential tools and information. They set and maintain professional practice standards, codes of conduct and Code of Ethics.

Appreciation

In real estate, appreciation refers to your property’s value or, more specifically, how much its value increases over time.

Appraisal

An unbiased estimate of how much a property is worth. When buying a home, this is made by a third party also known as the appraiser so make sure that the loan amount put forward by the lender is accurate.

Auction

An Auction is conducted when a Vendor (someone selling their property) partners up with a real estate agency to create a public sale of the property to the highest bidder (the buyer).

B

BIR

An abbreviation for Built-in Wardrobes is an allocated space room of the apartment where a cupboard is automatically installed and fixed into them.

Bridging Loan

Also referred to as bridging finance, it is a short-term loan used to allow a buyer to purchase a new property if they have not yet sold their current most recent property they sold hasn’t settled yet.

Buyer’s agent (BA)

A licensed and certified representative of a buyer who is looking to purchase a property and helps with negotiations between the vendor and their agent. During the property transaction, they also act as the buyer’s bidder and decision-maker.

C

Cash-Out Refinancing

This occurs when a newer, larger mortgage replaces the old one and is an opportunity for a property owner to use their mortgage to receive cash.

Capital gain

The profit that is made after selling a capital asset like a house or apartment. This is based on what the property initially valued compared to its current market value.

Capital Gains Tax

Capital gains tax results from the profit made from selling an INVESTMENT property only, not a family home.

Capital Gains Tax Discount

When you sell an asset like a property – you are entitled to a discount of up to 50% reduced capital gains tax as long as you have owned the asset for at least 12 months and are an Australian Citizen.

Capital Growth

This is the increase in value that your asset accumulates over time. This is calculated by comparing the market value (what it’s currently worth in the market) to the amount you paid when you first purchased the asset.

Capital Return

This is a returned payment from an investment that is not considered taxable and is not taxed as an income.

Caveat

A warning prohibiting one from certain acts or practices.

Caveat emptor

Latin for “let the buyer beware” is a warning to the buyer that they have the responsibility to thoroughly check the quality of the property they intend to purchase.

Certificate of occupancy

A certificate validating that a building project has reached a stage where it complies with all relevant statutory rebuilding regulations and is ready for occupation.

Certificate of Title

This is a legal document proving the official ownership of a piece of land.

Common property

Property or a part of a property that is not owned by one individual but by the whole group residing there who all have equal rights to use that piece of land.

Contract

A written or spoken agreement, especially one concerning sales, tenancy, and employment, that is forcible by law.

Conveyancer

A licensed professional specialising in giving the buyer information and advice regarding the sale of a property.

Counteroffer

A new return offer that is made by the seller in response to the original offer.

D

Deposit

The amount (usually 10% of the sale price) that needs to be paid as a first instalment on the purchase of something such as a property. Very important for off the plan apartment purchases as well, as a deposit will take your chosen apartment off the market until the project is completed.

Deposit Bond

An insurance policy acts as a cash substitute guaranteeing that the buyer will pay the vendor the deposit at the settlement date.

Depreciation

The amount that the value of an asset such as a property is reduced over time. In real estate, this term refers to a decline in the value of the land, the building’s structure, or any equipment assets within it such as windows, carpet, ovens or blinds.

Depreciation Schedule

A report outlining all of the available tax depreciable assets relating to a residential investment property or commercial building.

Disbursements

Costs incurred by a licensed estate agent, solicitor or conveyancer which can be passed on to the client.

Display Home

A house, townhouse or villa that has been built for display purposes to help the buyer get an idea of its appearance and inclusions when they enter a contract for the building of their own house.

Display Suite

Display suites provide potential purchasers with the opportunity to preview features & finishes of the future property, often featuring sample kitchens & bathrooms, or at least finishes boards. This creates an image in their minds of how a particular project is going to look.

Display Apartment

A finished apartment that is built for display purposes, especially for off the plan apartments, to help the buyer get an idea of its size, what it will look like, and the type of fittings and fixtures it will include.

Due Diligence

Due diligence is an investigation or review of the physical and financial of the property and its location prior to purchase.

E

Equity

The difference in the value of a property asset and the debt owed on that asset.

Equity = (what your property is worth) – (how much debt you owe)

For example, if your property is worth 800,000 and your mortgage is 430,000,

Equity = 800,000 – 430,000 = 370,000

Equal Credit Opportunity Act

A legal act created to make it unlawful for creditors to discriminate against any applicants due to race, colour, religion, national sex, marital status, age, disability or because they receive public assistance.

Exchange of contracts

The legal process where two legal representatives of the buyer and seller swap signed contracts to bind the agreement to sell a property. A deposit is usually paid at this time and may be forfeited if either party backs out of the deal.

Exclusive listing

When the seller of a property (vendor) has signed an agreement to make an estate agent solely responsible for the sale of their property.

F

Fair Market Value (FMV)

An accurate price that property or asset would sell for in an open and competitive market where both buyers and sellers understand the asset being sold with no added pressure to rush the transaction.

FHG

An abbreviation for Family Home Guarantee, this is a government initiative that supports eligible single parents with dependants in purchasing a family home by allowing them to pay a deposit as small as 2% and protecting them from Lenders Mortgage Insurance.

FHOG

Also known as First Home Owner Grant, it is a national scheme funded by states and territories providing a single grant that is payable for first-time homeowners that meet the given criteria.

Fittings

Removable items in a home can be taken out without damaging the items or space from where they were located. These items will not be noted in the contract, So if you are hoping the seller will leave the blinds that have been perfectly made for that apartment, make sure its in the contract!

Fixtures

Items installed securely to the property that would be impossible to remove without damaging the item or structure of the property. These are mentioned usually on the front page of your contract, ensure you check these carefully.

Foreclose

The removal of the owner’s right, title and interest of a property or asset. This is usually due to a lack of due payments being made.

G

Gazumping

This occurs when your offer to purchase a property is accepted, but the property is then sold to someone else who may have offered the seller a higher bid.

Guarantor

Someone who agrees to take responsibility for the home loan if the main borrower fails to pay the lender per the terms in the initial loan agreement.

H

Holding Deposit

A holding deposit is a sum of money that is paid to someone selling their property or asset as part of an offer to buy. This occurs before the signing of any paperwork.

House

A building that allows humans to reside in. Unlike other types of property, a house tends to be larger – often with more than three bedrooms, and usually comes with the land below it.

Household insurance

Insurance that covers your house and other structures/belongings of your property against all risks, including theft, extreme weather damage, and fire.

I

Interest

The amount of money that a borrower regularly pays to a lender in addition to the main amount borrowed.

Interest Rate

The interest rate is the amount of money a lender charges a borrower as a percentage of the amount they were loaned.

Interest-only loan

A type of loan which ensures the borrower is required to make only the interest payments on the loan for a specified period of time.

Investment

An asset acquired with the intent of generating income or appreciation from it.

Investment property

Property that is acquired by the owner or the tenant under a finance lease to earn rental income, capital growth or both.

L

Land Tax

An annual tax levied by the government that landowners must pay on the assessed value of their land.

Landlord

The owner of a house, apartment, land, or real estate which is rented or leased to an individual or business.

Landscaping

The act of modifying the visual features of an area of land. For example, this can be done by planting trees, shrubs, flowers, grass and other plants, or even putting in new paths or stepping stones in your garden.

Lease

A contract where one party (the lessee) agrees to pay or make a series of payments to rent a property owned by another party (the lessor) for a set time period.

LMI

Also known as Lender’s Mortgage Insurance, this is insurance that a lender takes out to protect them from the risk of not covering the outstanding loan balance if the borrower can’t meet the loan payments and the property is sold for less.

Loan Contingency

A written clause in a legal real estate contract stating certain requirements the buyer must meet before the approval of the property sale.

LVR

Also known as the loan-to-value ratio, this is the amount of money that needs to be borrowed against the value of a property expressed as a percentage.

M

Market Price

The current price at which a property can be bought or sold. Market value is determined by supply and demand and can change very quickly.

Mortgage

If a buyer cannot pay for the property upfront, a mortgage loan is used where the property can be used as collateral if the borrower is unable to repay the amount that they have borrowed from the lender plus interest.

Mortgage protection insurance

Also known as mortgage guarantee insurance, this is an income protection policy that provides coverage for a borrower’s mortgage payments in the event of redundancy, illness or injury that prevents them from working.

N

Negative gearing

This occurs when the costs associated with the investment property are more than the income it generates.

Net income

Can be calculated as an income minus the cost of goods sold, expenses, depreciation, interest, and taxes.

No cash-out refinance

The refinancing of an existing mortgage for an amount equal to or a landlord amount of the remainder of the existing loan balance.

Notice of Termination

The notice given by the landlord or tenant when they want to end the rental agreement and vacate the property.

O

OC

An abbreviation for Occupation Certificate, this is a document issued by the local government agency or building department certifying that a building adheres to the national building codes and is in a suitable condition for occupancy. An apartment complex must receive OC before settlements can commence with purchasers.

Offer

When the buyer presents to the seller the amount of money that they are willing to pay for their property which they can then accept, reject or make a counteroffer.

Off the plan

This is when a buyer signs the contract to purchase an incomplete property that is still under construction.

Offset account

An everyday transaction account where the credit is offset against the amount owed on the home loan or mortgage loan to reduce the interest charged.

Open House

Sometimes also called an open inspection, is a scheduled time when a property is made available for viewing by potential buyers.

Outgoings

Expenses are associated with the upkeep and maintenance of the property that the tenant has agreed to pay on top of the rent.

Owner’s Corporation

The owners of a strata scheme who are responsible for the repair, maintenance and overall management of the common property.

Owner Occupier / Owner Occupancy

This term is used when the legal owner of a property, like a house or an apartment, occupies and uses it.

Owner’s Reserve price

The lowest amount that a seller is willing to accept as the final bid on their property.

P

Pre-approval

When the lender agrees, in principle, to the lending of a certain amount of money towards purchasing a property but hasn’t reached the full or final approval.

Private Inspection

These are not publicly advertised but to buyers who are screened before their appointment viewing to ensure that they can afford the property price and are serious about following through with the sale.

Property Management

They oversee and manages many aspects of different real estate properties, including land, residential and commercial properties.

R

Rates

All property owners pay rates to help pay for maintenance, services, facilities and open spaces. Property values are used as a basis by the council to calculate the amount each owner needs to pay.

RBA

The Reserve Bank of Australia, Australia’s central bank, provides a range of banking services to the Australian Government and overseas central banks and conducts monetary policy to achieve its goals of price stability, full employment and the economic prosperity and welfare of the Australian people. [edit]

Real Estate

Property consisting of land or the buildings on top of it.

Real Estate Agent

Also often referred to as real estate broker or realtor, they are a licensed real estate professional who represents the people who buy, rent, sell or rent out real estate properties.

Repayments

The amounts of money that must be paid at regular rates to repay a debt, in real estate, this is usually a mortgage payment.

Reverse mortgage

Usually used by older homeowners, this is a type of mortgage allowing them to make use of the equity in their homes and doesn’t require a mortgage repayment until they have vacated the property as it is secured by a residential property.

S

Settlement

The process of taking legal ownership of the property consists of a pre-settlement inspection, signing the transfer documents, registering the transfer of ownership with the relevant government agency and making final payment to the seller.

Settlement date

The agreed-upon date that the property sale is finalised. On this day, the buyer pays the vendor and takes property ownership.

Second mortgage

A mortgage loan that is placed on a property in addition to the original one without having to refinance the first.

Solicitor

A legal professional who provides information and assistance to their clients regarding legal advice on an issue or services like property rights and contract making.

Stamp duty

The government tax levied on legal documents during the transfer of assets or property ownership and is calculated as a percentage of the contract value.

Strata Scheme

A system of multi-level apartment blocks and horizontal subdivisions comprising of private residences and communal spaces with multiple owners.

Strata Plan

A plan representing the owned buildings and lots of the strata scheme. A lot boundary can be identified as horizontal or vertical where:

Vertical boundaries – the lines on the floor plan relating to structures.
Horizontal boundaries – structural surfaces like a floor or ceiling.

Strata Title

A legal document of ownership for property or land in the strata scheme.

Sunset Clause

A condition included in some property sale contracts, like those for off the plan properties, that places a time frame (sunset date) on the validity of the contract. It is designed to protect the buyer and seller.

T

Tenant

Also referred to as a lessee, this is a person or legal entity who pays rent to legally use and occupy a property under the terms of a lease.

Terrace

A relatively level paved or planted outdoor area adjoining a building.

Title

A “title” is a legal document showing legal ownership of a property and grants the exclusive use of the land, allowing you to build on it.

Townhouse

A self-contained property within a complex which usually has shared walls on one or more sides of the property. The buyer owns their dwelling but has shared ownership of the land and common property with other owners in the complex.

Trust account

An account that is managed by a real estate where funds concerning real estate transactions are held for or on behalf of someone else for a specified period of time and cannot be used for other purposes.

V

Vacancy

A property or lot that is available or unoccupied.

Vacancy Rate

All of the vacant or unoccupied rentals in a property such as an apartment complex at a particular time are expressed as a percentage.

Valuation

Also known as Bank Valuation, this is an estimate of the property’s value made by a bank to determine the risk in lending money for it.

Vendor

A person or entity who offers something for sale. In a real estate transaction, they are the person or entity selling the property.

Y

Yield

Also known as rental yield, this is the measurement of annual rental income on investment property expressed as a proportion of the property value.

Z

Zoning

A planning tool used by local governments to determine the nature of the land or property and its intended use.

Conclusion

If you would like some more clarification or information on any of these real estate terms or are looking for guidance on your property journey, Liviti is happy to help!

If there is a term we have missed please let us know so we can help you and future readers!

Give us a call at (02) 9056 4311 or leave an enquiry here to chat with one of our friendly and informative team members to answer all your property questions and get you in your dream home asap!