Updated October 2026
Off the Plan Potential Problem Article 32 Tax Implications
Purchasing an off-the-plan property in NSW can offer tax concessions, but buyers also face obligations that affect the true cost of ownership. Transfer duty, GST, land tax and income tax require separate consideration. The result depends on your ownership structure, residency, intended use and contract terms. Obtain legal and tax advice before signing, and budget for the period before the property produces rent. The 2026 tax reforms also make the expected settlement and eventual sale dates important.
1 Budget for transfer duty and check payment dates
Transfer duty, commonly called stamp duty, is generally calculated on the higher of the purchase consideration and the property’s unencumbered value at the relevant liability date. For an ordinary off-the-plan apartment contract, it is not simply duty on the undeveloped land component. Later market growth before settlement does not automatically increase the duty assessment, although contract variations and transfers can require further assessment.
Under Revenue NSW’s off-the-plan rules, duty is normally payable within three months of signing, or by settlement if earlier. Eligible buyers intending to occupy the home may obtain a deferral: payment is then due at the earliest of 15 months after signing, completed settlement or an assignment of any part of the contract.
The deferral is unavailable for an investment property. Residence, purchaser and citizenship requirements apply. For current contracts, at least one qualifying purchaser generally must move in within 12 months of settlement and occupy the home continuously for 12 months. A changed intention can create interest and penalty exposure.
The First Home Buyers Assistance Scheme provides eligible purchasers with a full exemption for homes valued up to $800,000 and reduced duty above $800,000 but below $1 million. These concessions have separate eligibility rules. Foreign purchasers should also check surcharge duty before committing.
2 Understand GST and purchaser withholding
A developer’s taxable sale of new residential premises ordinarily attracts GST. Check whether the contract price includes it and whether any special condition allows an additional payment. A GST-inclusive price does not become more expensive merely because the buyer learns that GST forms part of it.
Under the ATO’s purchaser withholding guidance, buyers of relevant new residential premises generally pay part of the purchase money directly to the ATO at settlement. The usual withholding is one-eleventh of the contract price, or 7% where the margin scheme applies. The seller receives the remaining balance. Withholding allocates the agreed price; it is not automatically an extra charge.
Your conveyancer should check the supplier’s written notification, required forms and payment arrangements. Ordinary residential rental income is generally input taxed, so investors cannot simply recover the purchase GST as an input tax credit.
A real case about an unexpected GST demand
In Cityrose Trading Pty Ltd v Booth [2013] VSC 504, a buyer agreed to purchase residential property in Sorrento, Victoria, for $2.25 million. Shortly before settlement, the seller demanded another $225,000 under a GST special condition. The buyer paid under protest, and the disputed amount was held in a solicitor’s trust account.
The Supreme Court of Victoria concluded that the clause was void for uncertainty and could be severed. The stated purchase price was therefore understood to include any GST payable. Further consequential orders, interest and costs remained to be addressed.
This case concerned a Victorian residential sale. Its practical lesson also applies to off-the-plan buyers: have the GST wording checked before signing. A tax special condition can affect the amount needed at settlement, and litigation is an expensive way to resolve unclear drafting.
3 Claim deductions that actually apply
Investors may claim eligible interest, management fees and other rental expenses, while qualifying construction costs and depreciating assets are generally deducted over time. Private use, ownership shares and the timing of expenditure affect the calculation. Keep contracts, invoices, loan statements and rental records.
The ATO’s rental expenses guidance distinguishes deductible expenses from purchase costs and capital expenditure. Do not assume every payment made while construction is underway is immediately deductible. Vacant-land restrictions and other rules may limit holding-cost deductions. A depreciation schedule also does not turn the entire purchase price into a deduction.
Negative gearing occurs when deductible rental expenses exceed rental income. Any tax saving only covers part of the economic loss. Model repayments, vacancies, levies and maintenance without assuming that capital growth will rescue an unaffordable investment.
The Tax Reform No 1 Act 2026 received Royal Assent on 26 June 2026. Under the reform framework, relevant gains of eligible individuals and trusts accruing from 1 July 2027 move from the general 50% CGT discount to inflation-adjusted cost bases, with a minimum 30% tax on relevant gains, subject to exceptions. Eligible earlier gains retain their previous treatment.
From 2027–28, losses on relevant established residential properties acquired from 7.30 pm AEST on 12 May 2026 are generally restricted to residential-property income and gains, with unused losses carried forward. Earlier holdings are generally protected. Contract dates matter; delaying settlement does not necessarily change the acquisition date.
Qualifying new residential dwellings can retain negative gearing and access a choice of the 50% CGT discount. However, further legislation containing detailed eligibility provisions was introduced on 14 October 2026. Check the current requirements before relying on a concession. The marketing label “off the plan” does not establish that every tax condition is satisfied. Keep the contract, construction and occupancy documentation so your adviser can assess eligibility under the new-build rules.
Christine on the tax surprise that nearly cost us a chair
I explained these changes to an elderly client who almost fell off their chair. They had always understood that buying before 1985 meant the property was safely outside capital gains tax. For a moment, I thought we might need to inspect the chair before we finished discussing the property.
The reassurance was that the gains built up before the July 2027 transition remain protected. The old purchase date, however, will not necessarily protect every future gain. If you are planning to sell a long-held investment to fund your next purchase, that distinction matters.
My practical message is to organise the records and discuss a proper valuation. I would rather have that conversation calmly now than reconstruct decades of paperwork when everyone is rushing to settle.
For qualifying assets acquired before 20 September 1985, the legislation generally resets the cost base to market value immediately before 1 July 2027, subject to any permitted apportionment election. This does not create an automatic tax bill on 1 July 2027; tax generally depends on a later realisation. Missing a contemporaneous valuation does not automatically forfeit protection for earlier gains. Indexation adjusts eligible costs for inflation; it is not simply a penalty for missing a valuation. Main residence exemptions may still apply.
5 Plan for land tax and an eventual sale
NSW’s general land tax threshold remains $1,075,000. It generally applies to combined taxable land values, rather than separately to each property’s purchase price. Exemptions, trusts and foreign ownership can alter the result. Check ongoing liability and any contractual land tax adjustment.
For an ordinary contract purchase, the CGT acquisition date is generally the contract date. A rise in value during construction does not itself trigger CGT. A later sale or assignment may have tax consequences, and a profit-making venture may be taxed as ordinary income instead. Ask your accountant to assess the actual transaction.
The 2026–27 Budget tax explainer reports that around 230,000 individuals acquired negatively geared properties in 2022–23, approximately 1% of taxfilers. These are historical national acquisition figures, not statistics about NSW off-the-plan buyers’ tax mistakes or expected returns.
6 Get advice before exchanging contracts
Ask your solicitor to review duty, GST clauses, withholding and settlement adjustments, and ask your accountant to model deductions, ownership and future tax. Include a cash buffer for delays and unexpected costs. Contact CM Lawyers for help reviewing your NSW off-the-plan purchase before you commit.
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