Off-the-Plan vs Established Property: Pros, Cons & Financial Comparison

Overview

Buying off-the-plan — purchasing a property before it is built based on plans and artist impressions — offers some distinct financial advantages over established property, but also carries unique risks. Here is a comprehensive comparison to help you decide which approach suits your situation.

What Does Off-the-Plan Mean?

When you buy off-the-plan, you enter a contract to purchase a property that has not yet been constructed (or is under construction). You typically pay a deposit (usually 10%) at the time of signing the contract, with the balance due at settlement once the property is completed — which may be 12 months to three years or more in the future.

This delayed settlement creates both opportunities and risks that do not exist with established property purchases.

Stamp Duty Differences

One of the most significant financial advantages of buying off-the-plan is the potential for stamp duty savings. Several Australian states and territories offer concessions or exemptions for off-the-plan purchases:

How Off-the-Plan Stamp Duty Concessions Work

In most states that offer concessions, stamp duty is calculated on the value of the property at the time the contract is signed (the "contract value") rather than the completed value. In some cases, the land component alone is used for the stamp duty calculation, excluding the construction component.

The specifics vary significantly by state and territory and are subject to change. As of early 2026:

• Victoria: Offers a concession where off-the-plan purchasers pay stamp duty on the land value only (excluding the building component), subject to eligibility criteria. First home buyers may also qualify for additional exemptions or reductions.
• NSW: Has offered various off-the-plan stamp duty concessions historically. Check the current Revenue NSW guidelines for applicable concessions.
• Queensland: First home buyers purchasing new properties (including off-the-plan) may be eligible for the First Home Concession, which can significantly reduce or eliminate transfer duty.
• Other states: ACT, SA, WA, and Tasmania each have their own concession frameworks. Always check the relevant state revenue office for current rules.

Important: Stamp duty rules change frequently. Always confirm the current concessions with your conveyancer or the relevant state revenue office before making a purchase decision.

Calculate the stamp duty on your purchase with our Stamp Duty Calculator.

Depreciation Advantages

For investors, off-the-plan property offers the most generous depreciation deductions available under Australian tax law.

Division 43 (Building Allowance)

Brand-new buildings qualify for Division 43 depreciation at 2.5% per year of the original construction cost for 40 years. On a property with $300,000 in construction costs, this represents a $7,500 annual deduction — reducing your taxable income without any additional cash outlay.

For established properties (particularly those built after 1987), Division 43 deductions are still available but are based on the original construction cost, which may be much lower. Properties built before September 1987 do not qualify for Division 43 at all.

Division 40 (Plant and Equipment)

New properties come with brand-new fixtures and fittings — carpets, blinds, ovens, dishwashers, air conditioning units, hot water systems — all of which can be depreciated under Division 40 at their full new value.

Important change: Since May 2017, investors who purchase established (second-hand) residential properties can no longer claim Division 40 depreciation on existing plant and equipment. Only items the investor purchases new can be claimed. This gives off-the-plan and new properties a significant depreciation advantage.

The combined Division 43 and Division 40 deductions on a new property can be substantial — often $10,000 to $20,000 or more per year in the early years. For an investor on a marginal tax rate of 37%, this could mean $3,700 to $7,400 in annual tax savings.

Explore the impact on your returns with our Negative Gearing Calculator and Capital Gains Tax Calculator.

Risks of Buying Off-the-Plan

While the financial incentives are real, off-the-plan purchases carry risks that established property does not:

1. Settlement Risk

You commit to a purchase price today but may not settle for one to three years. During that time:

• Market decline: If the market falls, you may settle on a property worth less than you paid. Banks will value the property at the time of settlement, not the contract date — potentially requiring you to contribute more funds if the valuation comes in below the purchase price.
• Lending changes: Your borrowing capacity may change between contract and settlement due to rate rises, policy changes, or changes in your personal circumstances.
• Deposit at risk: If you cannot settle, you risk losing your deposit.

2. Developer Risk

• Delays: Construction often takes longer than projected. Delays of 6-12 months are not uncommon.
• Developer insolvency: If the developer goes into administration, your deposit may be at risk (though some states require deposits to be held in trust).
• Changes to the project: Developers may make changes to materials, finishes, or even the overall project scope during construction.

3. Quality and Defects

• Cannot inspect before purchase: You are buying from plans, display suites, and artist impressions — the finished product may differ from expectations.
• Defect risk: New buildings, particularly apartments, have experienced well-publicised quality and defect issues in recent years. While statutory warranties apply, pursuing defect claims can be costly and time-consuming.

4. Potential Oversupply

Large off-the-plan developments can create localised oversupply when many units settle at the same time, putting downward pressure on values and rents in the immediate area.

Financial Comparison: Off-the-Plan vs Established

Here is a simplified comparison of the key financial factors:

Making Your Decision

The right choice depends on your priorities:

• Choose off-the-plan if: You want maximum depreciation deductions, are comfortable with settlement risk, can benefit from stamp duty concessions, and are investing for the long term.
• Choose established if: You want to inspect before you buy, prefer the certainty of immediate settlement, want renovation potential, or are concerned about construction quality.

Whichever path you choose, model the numbers carefully. Use our Stamp Duty Calculator to compare duty costs, our Negative Gearing Calculator to model depreciation benefits, and our Capital Gains Tax Calculator to project long-term returns.

Calculate stamp duty: Stamp Duty Calculator | Model tax benefits: Negative Gearing Calculator | Project CGT: Capital Gains Tax Calculator.

Sources: ATO (Divisions 40 and 43 depreciation rules), state and territory revenue offices (stamp duty concessions), ASIC MoneySmart (off-the-plan risks), BMT Tax Depreciation, Washington Brown.