The end of financial year is always a significant moment in the property calendar. For developers, investors and buyers working in the new build and off-the-plan space, the current tax landscape carries some particularly important considerations – including proposed Federal Budget changes that could reshape the investment calculus for years ahead.
For Investors in New Build and Off-the-Plan Property
New residential builds sit in a uniquely advantageous position right now – both under existing tax rules and under the proposed Federal Budget changes.
Under current ATO rules, new build investors benefit from:
- Depreciation on both the building structure (Division 43) and all plant and equipment (Division 40)
- Full deductibility of loan interest and holding costs during the income-producing period
- The ability to claim a full suite of property management and ownership expenses
For off-the-plan buyers, expenses may begin to accumulate before the property settles. Understanding what is and is not deductible during the construction phase is worth clarifying with your accountant before 30 June.
The Federal Budget Factor
The 2025-26 Federal Budget proposed significant changes to negative gearing and Capital Gains Tax for established residential properties acquired after Budget night. Under the proposal:
- Negative gearing on established residential properties would be restricted
- The 50% CGT discount would be replaced with cost-base indexation and a 30% minimum tax
- New residential builds are fully exempt from both changes
If these changes are legislated as proposed, the investment case for new builds becomes considerably stronger relative to established property. Investors currently evaluating their portfolio strategy – or considering their next acquisition – would be well served to understand this distinction before making decisions.
This content is based on Budget Paper No. 2 from the 2025-26 Federal Budget. Final legislation may differ from the proposals outlined above. This does not constitute financial, tax or investment advice. Seek independent professional advice relevant to your circumstances.
For Property Developers
For developers working through project delivery, land acquisition or construction, tax time involves a distinct set of considerations:
GST and the Margin Scheme
Developers selling new residential properties are generally required to remit GST. The margin scheme – where applicable – can significantly reduce the GST liability by calculating it on the margin (sale price minus acquisition cost) rather than the full sale price. Whether the margin scheme is available depends on the nature of the acquisition and other conditions. This is a significant planning item and should be reviewed with your tax adviser well ahead of settlement periods.
Land Holding Costs
Land held for development may allow for deductions on interest and certain holding costs, depending on the structure of the project and its income-producing status. The distinction between capital and revenue treatment of land costs is a complex area requiring professional advice.
Depreciation Schedules on Completed Stock
For developers retaining completed dwellings within a portfolio (for rental or other income purposes), commissioning depreciation schedules prior to settlement or first rental is best practice and maximises the deductible amount from day one.
PAYG Variations
Active developers and investors with significant depreciation claims or interest deductions may benefit from a PAYG withholding variation, reducing the tax withheld from other income throughout the year. This is a cash flow consideration worth raising with your accountant now.
For Off-the-Plan Buyers Approaching Settlement
If you have an off-the-plan property approaching settlement this financial year or in the next 12 months, now is the time to:
- Confirm your depreciation schedule has been or will be prepared by a quantity surveyor prior to settlement
- Understand the income and expense position you are moving into from the settlement date
- Review the impact of settlement on your tax position for this financial year vs next
Properties settling close to 30 June can create timing opportunities (or complications) depending on your broader tax position. Planning ahead is worthwhile.
Thinking About Your Next Move?
Kapalua works with investors, off-the-plan buyers, developers and land estate clients across the region. If you are evaluating your position heading into the new financial year, we are well placed to assist.