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The Right Fit For Your Goals

When purchasing a brand-new property, one of your first decisions is whether to buy off-the-plan or completed. While both options have their advantages, your ultimate decision will depend on your financial situation and ongoing goals. In this issue of Property Insight, we explore the possibilities to help you decide which way to go.

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A defining guide


Buying property off-the-plan simply means purchasing a property prior to construction beginning, or during the construction phase. In this case, you will choose a property based on the architect’s floor plans, hence the term ‘off-the-plan’. Some developers have a ‘display’ available for inspection, that will provide you with an idea of the finished product.


Completed properties are just that; finished and ready for tenants to move in straight away. Some investors, and particularly owner-occupiers, may prefer to buy a brand-new completed property as they can inspect the actual property, including its quality of finish and aspect.

The benefits of purchasing off-the-plan

Greater selection

Buying a property off-the-plan often provides a far greater selection, particularly if you purchase in the early stages. Most projects have a pre-release stage before the development is offered to the entire marketplace. If you can secure a property during this pre-release stage, you can choose the best location, position and views within your budget. You will also have the choice of a range of floor plans and may be able to choose from various colour schemes.

If you’re looking for specific criteria in a property, it may suit you to purchase off-the-plan. Perhaps you want to buy a brand-new two-bedroom apartment on the second floor, facing northeast, with two car parks and a storage cage? If that’s the case, buying off-the-plan means you’re more likely to meet these criteria.

Gains in a rising market

In a rising market, purchasing off-the-plan can be a clever strategy. You secure the property at today’s price, but may not settle for up to 36 months. If the property increases in value during this time, it can mean significant capital gains before you’ve even settled. This strategy has been used by many investors to leverage their portfolio faster than otherwise possible.

Time to save

Buying off-the-plan generally requires a 10 per cent deposit with the balance due upon settlement. If you are in a position to invest now and you believe your financial situation will be unchanged or improved by settlement, buying off-the-plan gives you time to save some extra funds prior to the property’s completion.

The benefits of purchasing completed

Immediate tax benefits

Subject to the type of dwelling and your financial goals, purchasing a brand-new completed property could maximise your tax benefits right now. If your goal is to minimise your tax immediately, a brand-new completed property is more suitable and will enable you to start claiming deductions in the current financial year.

You can start claiming your tax entitlements almost straight away; a thirty-day settlement is standard. Why not consider a Pay As You Go (PAYG) variation? This can help you manage the cash flow of an investment property throughout the year. Using a PAYG system you can claim back tax regularly, rather than in one lump sum at the end of the financial year.

A PAYG variation means your employer will reduce the amount of tax withheld to reflect set deductions such as depreciation on a rental property. It is a way of decreasing the amount of tax you pay each pay period.

An off-the-plan purchase won’t provide you with any tax benefits during the construction phase, which can be up to 36 months. By buying completed, you could save thousands in tax this financial year while building wealth through asset growth (subject to your taxable income and the selection of property).

Quick tip: A staged property acquisition program may include completed and off-the-plan properties. Depending on your goals, a completed property may be purchased to reduce taxable income straight away, while an off-the-plan property may be secured for growth, particularly in a rising market.

Pre-pay your loan interest

When you buy a completed property, it is possible to pre-pay the interest on your investment property’s loan, allowing you to claim next year’s interest repayment against this year’s taxable income. This strategy has become increasingly popular for investors seeking to offset their tax in the current financial year.

The pre-payment period cannot exceed 12 months. Most lenders will allow you to pre-pay the interest on a loan less than 12 months, however you will need to wait until the new financial year to claim the deduction, hence many investors make the pre-payment as close to June 30 as possible. This type of strategy is only suited to investors with the cash flow available to pre-pay interest.

There are three key benefits to pre-paying the interest on your investment property’s loan:

    1. Interest rate: Pre-paying your interest will usually entitle you to a discounted rate on the fixed interest rate through your lender. Most lenders will discount the interest rate on the pre-payment, ranging from 0.1%–0.4%.

    2. Budgeting: You won’t need to worry about making any interest payments for 12 months. Knowing that the interest is pre-paid can provide more certainty for you as an investor when budgeting for rental property expenses.

    3. Tax planning: If you are focused on minimising tax this financial year, this strategy may assist you to create a tax saving. In most cases, the most substantial tax saving is made on the first pre-payment. If you purchase a completed property late in the financial year and pre-pay the interest as close to June 30 as possible, minimum rental income has been received and you can maximise your deductions against this financial year. This will in many instances generate a higher tax deduction than would otherwise be possible.

For some, there may also be tax savings available on future pre-payments too – specifically if you have a particularly high taxable income in one financial year and/or lower income the following year. This may be the case for an investor who has sold an investment property this financial year, thus incurring capital gains tax.

By purchasing another investment property and pre-paying the interest, the tax rate can be reduced, generating a tax saving. Another good example would be anyone who is looking to retire or semi-retire, knowing that their income will be substantially less the following year.

This tax planning strategy may provide the opportunity to allocate the surplus elsewhere, for example, back into your principal place of residence, which may have non-deductible debt.

The best way to determine if this strategy is suitable for your personal circumstances is to speak with a qualified accountant or financial adviser. If used under suitable circumstances, pre-paying interest on an investment property loan can be a powerful investment tool.

So which is the best option?

The answer to this question comes down to you. Buying off-the-plan isn’t for everyone; emotional choices are easier to make on completed properties, particularly for owner-occupiers. In this respect, purchasing a completed property minimises risks and surprises, and there are added tax benefits, as outlined.

Meanwhile, buying off-the-plan can provide greater choice and provide you with some extra time, both of which can have a great impact on your property portfolio and ongoing financial gains.

Ultimately, there are benefits to both off-the-plan and completed properties. Your decision should be based on what you are comfortable with and your individual financial goals.

DISCLAIMER: Whilst the publisher and author believe that the information contained in the publication is based on reliable and researched information, no warranty is given as to its accuracy and persons relying on this information do so at their own risk. Anyone who intends to use the information as the basis for making financial or business decisions should first obtain advice from a qualified professional person. This article is published on the understanding that neither the publisher nor the author - is responsible for the results of any action taken on the basis of the information published; and is not engaged in rendering legal, accounting, professional or other advice or services. The publisher and author expressly disclaim all liability and responsibility to any reader of this publication as a consequence of anything done, or not done, by a reader relying upon any part of this publication. (C) This article may not be reproduced in full or in part without the specific written consent of Which Property? and the Author.

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