Financing a new build: house and land, off the plan or rebuild

Published 2 October 2026 · Updated 2 October 2026 · 7 min read · By Shane Heness, mortgage broker

Since the package passed in June the investor conversation in our office has changed shape. People have stopped arguing about whether the change is real and started asking what they should build instead. That is the right question, and it has three realistic answers. A fortnight ago I wrote about what the change did to borrowing capacity. This one is about where you put the money.

This article is about the finance, because that is my job. Whether a particular purchase qualifies for the exemption is a tax question for your accountant, and the detailed definition is still in draft. What I can tell you is what each route costs to fund, how long your money sits there before anyone pays you rent, and which one lenders make easy.

What actually counts as a new build

The Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 passed parliament on 25 June 2026. From 1 July 2027, net rental losses on residential property acquired after 7:30pm AEST on 12 May 2026 can only be offset against other residential property income, with excess losses carried forward indefinitely. Property held at the announcement is grandfathered. New builds are carved out.

The part that matters for a building decision is the definition of a new residential dwelling, and that is still being settled in a second tranche. Treasury consulted on the exposure draft between 3 and 21 August 2026. The draft sets out four ways a dwelling qualifies: it is built on land that had no residential dwelling on it; it increases the number of dwellings on land already owned; it is acquired within 24 months of the occupancy certificate first being issued and was a new residential dwelling to the seller; or a non residential building is converted into one or more dwellings.

Read that second category again, because it catches people. A rebuild that replaces one house with one house does not increase the number of dwellings, so on the draft rules it does not qualify. Demolish one house and build a duplex and it does. That makes the exemption a planning decision as much as a finance one, and it is the most expensive thing on this page to get wrong.

The three routes, side by side

Here is how they compare on the things that actually drive a lending decision.

Tax treatment reflects the exposure draft released for consultation between 3 and 21 August 2026 and is not final. Finance structures are the general position across the LoanBuddy panel at October 2026. Confirm the tax position with your accountant.

Our knockdown rebuild article from July still holds on the lending mechanics, but the arithmetic underneath it has moved. If you were planning a like for like rebuild on an investment property partly for the gearing, that plan needs another look before you sign a demolition contract.

What each route costs before a tenant moves in

Lenders will quote you a rate. They will not quote you the holding cost, and on a build that is the number that hurts. Take a $750,000 project in Western Sydney at 80 per cent lending.

Transfer duty calculated on the Revenue NSW rates applying in 2026-27. Interest estimated at 6.50 per cent on drawn balances over a 15 month build, indicative across the LoanBuddy panel at October 2026. Your figures will differ.

Two things jump out. The two contract structure saves about $15,750 in duty, because duty is charged on the land contract and not on the building contract. It then hands most of that back in interest, because you carry the land from the day it settles and nothing is paying you rent.

Off the plan looks cheapest on that table, and it is, right up until the valuation. The lender values at completion, not at exchange. If a $750,000 apartment values at $700,000 two years later, an 80 per cent lend falls from $600,000 to $560,000 and you find the other $40,000 in cash or wear lenders mortgage insurance. Your approval will have expired as well. Approvals run three to six months and off the plan settlements run 12 to 36, so you are reassessed on the income, rates and policy that exist at settlement rather than the ones that existed when you signed.

Where the money actually goes during a build

On a construction loan you pay interest only on what has been drawn, not on the approved limit. Funds release in stages against the builder's invoices and a valuer's inspection, broadly slab, frame, lock up, fixing and practical completion, at roughly 15 to 20 per cent, 20 per cent, 20 per cent, 30 per cent and 10 per cent of the build contract. Our article on how drawdowns actually work walks through the paperwork at each stage. The trap is the clock. Most lenders allow 12 months from the first progress draw and the majors allow 24, and extensions are assessed case by case rather than granted automatically. A build that runs long leaves you paying interest with no rent and no certainty.

Which route suits which investor

• Cash to spare and patience, and you want the duty saving: house and land on registered land. Avoid unregistered lots unless you can carry a six month delay without stress.
• Tight on cash now, stronger later: off the plan, because nothing is drawn until settlement. Budget for a valuation shortfall and have a solicitor review the contract.
• You already own the land and the zoning allows a second dwelling: a rebuild or subdivision that adds a dwelling, which qualifies where a like for like rebuild does not.
• You want a tenant this quarter: a completed new dwelling bought within 24 months of its occupancy certificate. Get the certificate date in writing before you exchange.

Two things to check before you sign

First, duty. NSW lets you defer transfer duty on an off the plan purchase for up to 12 months, and investors keep assuming that applies to them. It does not. At least one buyer has to move in within 12 months of completion and live there as their principal place of residence for a continuous 12 months, and Revenue NSW is explicit that the deferral is not available for investment properties or where any purchaser is a foreign person. On an investment purchase, plan on duty about three months after exchange.

Second, the rate you model. The cash rate moved to 4.60 per cent on 29 September 2026, the fourth rise this year, and lenders started passing it through in early October. If you are modelling a build that finishes in late 2027, do not model it at today's rate, and check that the loan still services at the lender's assessment rate rather than the headline one.

The thing I would most like investors to avoid is letting the tax tail wag the dog. A new build in a weak location bought for an exemption is still a poor purchase. But where the numbers do work, the route you choose moves your duty bill, your holding cost and your settlement risk by tens of thousands of dollars. Our construction loans page sets out how we structure the funding and our investment loans page covers the servicing side. If you want it run against your own figures, book a free call.

Frequently asked questions

Written by Shane Heness

Owner and mortgage broker at LoanBuddy, Parramatta NSW. Eight years as a mortgage broker and a property investor since 2015. Credit Representative #528658 under Australian Credit Licence #389328.