Cooling-off forfeit explained — what pulling out costs in NSW and Victoria

The short version

The cooling-off forfeit is the penalty you pay to walk away from a contract during your cooling-off period. In NSW it's 0.25% of the purchase price. In Victoria it's $100 or 0.2% of the purchase price, whichever is greater. You don't owe more than that, whatever your reason for pulling out — but you also don't get it back. It's the price of the option to change your mind, and it only exists if you had a cooling-off period in the first place.

NSW: the 0.25% forfeit

In NSW, rescinding during the 5-business-day cooling-off period costs you 0.25% of the purchase price under the Conveyancing Act 1919 (NSW). It's a flat quarter of one per cent, so it scales with the price:

• $800,000 purchase → $2,000 forfeit
• $1,000,000 purchase → $2,500 forfeit
• $1,500,000 purchase → $3,750 forfeit

The vendor keeps that 0.25% and returns the rest of anything you'd paid. There's no discretion in it and no arguing the figure down — it's fixed by the price you agreed.

Victoria: $100 or 0.2%, whichever is greater

Victoria works to a different formula. Rescinding during the 3-clear-business-day cooling-off period under the Sale of Land Act 1962 (Vic) costs you $100 or 0.2% of the purchase price, whichever is the larger number. The $100 floor only bites on very low-value land; on any normal home the 0.2% is what applies:

• $500,000 purchase → $1,000 forfeit
• $700,000 purchase → $1,400 forfeit
• $900,000 purchase → $1,800 forfeit

The deposit you've paid is refunded to you, less that penalty. So on the same headline price, a Victorian forfeit (0.2%) is a touch lower than a NSW one (0.25%) — but the practical message is identical: cooling off has a cost, and you should treat it as a deliberate, paid-for exit rather than a free trial.

Where the money actually comes from

The forfeit isn't a separate invoice — it comes out of what you've already handed over. In NSW, buyers often pay a small holding deposit at exchange (0.25% is common, precisely because it matches the forfeit), with the balance of the full 10% deposit due once cooling-off ends. If you cool off, the vendor retains the 0.25% and returns any excess; if you'd paid only the 0.25% holding figure, the vendor simply keeps it and you owe nothing further. In Victoria the deposit is likewise refunded net of the penalty. Either way, the forfeit is capped at the percentage above — the vendor can't keep your whole deposit for cooling off within the window.

When there's nothing to forfeit — because there's no cooling-off

A forfeit can only apply where a cooling-off period exists. Buy at auction, sign a Section 66W certificate in NSW, or sign inside the three business days around a public auction in Victoria, and there is no cooling-off — which also means no cheap exit. In those cases the contract is binding the moment you sign, and backing out later isn't a 0.25% question at all: you'd be in breach and could lose the entire deposit and face a claim for the vendor's losses. That's a very different order of money from the forfeit, and it's exactly why an unconditional contract carries so much more risk.

What to check before you sign

1. Do you have a cooling-off period at all? No period means no forfeit option — the only way out is a costly breach. Confirm this first.
2. Work out your forfeit in dollars. 0.25% of the price in NSW, 0.2% (or $100) in Victoria. Knowing the exact figure makes the decision calmer if you need it.
3. Check how much deposit you're paying at exchange. A small holding deposit limits what's at stake if you cool off; a full 10% up front means a refund has to be processed to get the balance back.
4. Read the deposit and cooling-off special conditions. Some contracts alter the deposit structure or try to shorten the window — both change your position if you pull out.
5. Use the window for real checks. Finance, inspections and a proper contract read. The forfeit is only worth paying if it saves you from a worse problem.

Common questions

Can the vendor keep my whole deposit if I cool off?

No. If you rescind within the cooling-off period, the vendor's entitlement is capped at the forfeit — 0.25% in NSW, or $100/0.2% in Victoria — and the rest of any deposit must be returned. Losing the full deposit is a consequence of breaching a binding contract, not of lawfully cooling off.

Do I get the forfeit back if I buy a different property later?

No. The forfeit is retained by the vendor of the contract you exited. It isn't a credit and it doesn't transfer to another purchase. Treat it as a sunk cost — the price of the safety the cooling-off period gave you.

Is 0.25% or 0.2% worth paying to get out?

Often, yes. If a building report, a finance decline or a special condition you missed turns a good buy into a bad one, a few thousand dollars to walk away can be the cheapest outcome available. The forfeit exists so you can make that call — using it isn't cold feet, it's the window working as intended. For how the window itself runs, see our NSW and Victorian cooling-off guides.