Changes to the NSW Budget stamp duty concessions

23 June 2010

There were a number of issues of detail concerning the NSW Home Builders’ Bonus (stamp duty concessions) that we’ve been talking to the NSW Government about. We’re pleased to say that they’ve been willing to listen and adjust the fine detail of the scheme to ensure that its implementation is as smooth as possible.

The changes must be approved by Parliament before they take effect.  The government is hoping the legislation will pass through Parliament quickly, but this may require Opposition support.  The Opposition are current considering their position. 

Removing the construction timetable

Under the home builders’ scheme agreements for sale or transfers of vacant land or a new home will be eligible for the “New Housing Concession” where they are entered into on or after 1 July 2010 and before 1 July 2012.  However, an off the plan purchase would have been eligible only if the agreement for sale is:

  • entered into on or after 1 July 2010 and before 1 July 2011, and completed by 31 December 2012; OR
  • entered into on or after 1 July 2011 and before 1 July 2012, and completed by 31 December 2013.

This timetable assumes an 18 month timeframe for the carrying out and completion of all construction works and the issue of occupation certificates. In the context of medium or high density apartments this timeframe is unrealistic. This kind of construction can easily take two years or more.

The government is now planning on removing the mandatory timetable for completion. This leaves the timetable for completion up to the parties to the off-the-plan contract. These contracts typically allow three years for a project to be completed and a buyer normally has the right to rescind if this timetable is not met. The government is right to conclude that it does not need to regulate the construction timeframe.

Staged development

The government’s previously announced definition of “off-the-plan” for the “New Housing Concession” is narrow – confining it to any purchase made prior to the laying of the foundations of a building.

The definition announced as part of the State Budget would have created problems for construction projects that consist of multiple towers sharing common foundations. The scheme would have incentivised developers to design buildings with separate and district foundations even when this was not efficient.

As a result the government is changing the definition for staged development when more than one multi-storey tower is to be built on a single set of foundations (such as a common car park).

As a result of the change, it will now be possible for a developer to put in foundations and commence construction of the first multi-storey tower, without losing the right to sell zero stamp duty apartments off-the-plan for the second and subsequent towers.

Projects sold after construction commences

From time-to-time developers do get into financial difficulty and sites are abandoned with part or all of the foundations already in place. The World Square site and the current Chatswood interchange are well known examples. Such sites would have remained idle for longer under the scheme as originally announced, because any developer who acquires such a site would not have been able to market homes off-the-plan under the “New Housing Concession”.

The government is changing the scheme so that if a partially built development changes hands, construction work ceases and no more than 25 per cent of the construction work has been completed, the developer can market the home with zero stamp duty on an off-the-plan basis, prior to resuming construction.

More detail on these changes will be available here shortly.