Buying a property off the plan can be an attractive option, but it comes with unique capital gains tax (CGT) implications. Because settlement may take place months—or even years—after signing the initial contract, it’s important to understand how CGT rules apply.
When Is the Property Acquired for CGT Purposes?
For CGT purposes, the acquisition date of an off-the-plan property is the date you sign the contract, not the date of settlement.
This means:
Practical Consequences of This Rule
1. Meeting the 12-Month Rule for the CGT Discount
If the property is not your CGT-exempt main residence, you may be eligible for the 50% CGT discount. The 12-month holding period starts from the contract date—giving you ample time to qualify, even if you sell within 12 months of settlement.
2. Timing of Capital Gains or Losses
Capital gains or losses are recognised in the income year you enter the sale contract—not the year of settlement.
Example:
This rule applies even if you sell before the original off-the-plan contract has itself settled.
Commissioner’s Administrative Approach
While the law says gains arise in the year of the sale contract, the ATO applies a practical concession. You don’t need to include the gain in your tax return until settlement proceeds are received. At that point, you amend the relevant prior year’s tax return.
CGT Exemption for Your Home
If your off-the-plan purchase is intended to become your main residence, you may be eligible for the building concession. This allows the property to qualify for the main residence CGT exemption once construction is complete and you move in, provided you meet the conditions.
Off-the-Plan vs Option Agreements
It’s important not to confuse off-the-plan purchases with option agreements. These are treated as separate legal transactions for CGT purposes. Only when an option is exercised does it merge into the main property transaction, with different tax consequences.
Final Thoughts
The CGT rules for off-the-plan property purchases can be complex, especially with timing differences between contract and settlement. Understanding the acquisition date, discount eligibility, and reporting obligations is key to avoiding mistakes.
Need advice on CGT for your off-the-plan property? Contact us today to ensure you apply the rules correctly and make the most of available concessions.
Tommy Li, CA
Director, Verity Advisory | Registered Tax Agent | Authorised Financial Adviser (ASIC Rep No. 1261831) | Member, Chartered Accountants Australia & New Zealand
Tommy is a Chartered Accountant with 20+ years advising medical professionals on tax, financial structure and practice decisions. He founded Verity Advisory to provide integrated advice for doctors at career-defining financial inflection points — combining tax, lending and financial planning into a single structured approach.
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