Land transfer duty - Consideration - Assumption of tax liabilities

Ruling history

Preamble

The Duties Act 2000 (the Act) imposes duty on the transfer of dutiable property, including land. Duty is chargeable on the ‘dutiable value’ of the property, which is defined in section 20(1) as the greater of:

• the consideration (monetary or non-monetary) for the dutiable transaction; and
• the unencumbered value of the dutiable property.

For many transfers of land, the consideration under section 20(1) is not confined to the sale price stated in the contract of sale. The purchaser may also be required under the contract to provide, in addition to the sale price, an amount for or towards a tax liability for which the vendor is liable in respect of the land (an Assumed Tax Liability Amount). 

This ruling explains when an Assumed Tax Liability Amount forms part of the consideration for a transfer of land under section 20(1). It provides specific guidance on land tax, windfall gains tax (WGT) and congestion levy liabilities. It does not address the meaning of consideration in other sections of the Act (for example, the lease provisions), or the characterisation of other amounts under section 20(1), including late settlement interest and default interest.

This ruling is provided as a guide only and is not exhaustive. If your circumstances are not covered, you can apply for a private ruling in accordance with Revenue Ruling GEN-009v3 - General information on private rulings.

Ruling

The term ‘consideration’ is not defined in the Act. In Chief Commissioner of State Revenue v Dick Smith Electronics Holdings Pty Ltd [2005] HCA 3 and Commissioner of State Revenue v Lend Lease Development Pty Ltd [2014] HCA 51 (Lend Lease), the High Court held that the consideration for a transfer of land is the money or value received by the vendor so as to move the transfer to the purchaser as stipulated in the agreement. That inquiry is determined by viewing the transaction as a whole. A close or direct link between a payment and the transfer of land is not required, and the terminology used in the transaction documents is not determinative of whether a payment is consideration.

In Commissioner of State Revenue v 1043 Melton Highway Pty Ltd [2020] VSC 820 (Melton Highway), the Supreme Court applied Lend Lease and framed the question as whether, at the time of transfer, the vendor would transfer the land only in return for the payment in issue. If so, the payment moves the transfer and is consideration. Whether the payment also serves another purpose is not relevant.

Consistent with Lend Lease and Melton Highway, an Assumed Tax Liability Amount forms part of the consideration for a transfer of land under section 20(1) if, assessed at the time of transfer and viewing the transaction as a whole, it is part of what moves the transfer.

The characterisation of an Assumed Tax Liability Amount as consideration turns on its substance, not form. Labels (including ‘adjustments’) and payment direction (to the vendor directly or to a third party) do not determine the characterisation.

Land tax

Sale price of land is less than the threshold amount

Section 10G of the Sale of Land Act 1962 (the SLA) provides that a provision of a contract of sale is of no effect to the extent it purports to require the purchaser to assume the vendor’s land tax (by providing an amount for or towards it) where the sale price of the land is less than the ‘threshold amount’ determined under section 10I of the SLA. Accordingly, any such purported assumption of land tax cannot move a transfer of land and is not consideration under section 20(1) of the Act. 

The threshold amount was $10 million for the 2024 calendar year and is adjusted annually in accordance with the consumer price index under section 10I of the SLA. 

Sale price of land is at or above the threshold amount

If the sale price of land is at or above the threshold amount, the purchaser may agree to assume some or all of the vendor’s land tax by providing an amount for or towards it (an Assumed Tax Liability Amount). That amount forms part of the consideration for a transfer of the land under section 20(1) if, assessed at the time of transfer and viewing the transaction as a whole, it is part of what moves the transfer. 

Where the sale price is at or above the threshold amount, a contract of sale may apportion the vendor’s land tax liability for the land tax year that includes settlement. In that case, the contract typically requires the purchaser to pay, in addition to the sale price, a specified amount of the vendor’s land tax liability at or before settlement. Without that amount, the vendor would not transfer the land. That portion of land tax paid to the vendor is what moves the transfer of land under the contract, and therefore constitutes consideration for the transfer. 

Windfall gains tax

Existing windfall gains liability at contract date

Section 10H of the SLA provides that a provision of a contract of sale (or an option) is of no effect to the extent it purports to require a purchaser to assume (by providing an amount for or towards it) a WGT liability that exists when the contract is made (or option granted). Accordingly, any such purported assumption of WGT cannot move a transfer of land and is not consideration for the transfer under section 20(1) of the Act.

No existing windfall gains liability at contract date

Where no WGT liability exists when a contract of sale is made, the parties may provide that, if one arises before settlement, the purchaser will assume some or all of the vendor’s WGT liability by providing an amount for or towards it (an Assumed Tax Liability Amount). That amount forms part of what moves the transfer of land under the contract if it is provided in addition to the sale price, such that without it the vendor would not transfer the land. It is irrelevant whether payment of the amount is made prior to settlement or made to the vendor or the Commissioner.

Congestion levy

Under the Congestion Levy Act 2005, the owner of a car park in the levy area is liable each year to pay the levy imposed on leviable parking spaces on the land. The owner may be solely liable or jointly and severally liable, depending on the type of car park.

When a car park is sold under a contract of sale, the purchaser may agree under the contract to assume some or all of the vendor’s congestion levy liability by providing an amount for or towards it (an Assumed Tax Liability Amount). That amount forms part of what moves the transfer if it is provided in addition to the sale price, such that without it the vendor would not transfer the land.

Rates

For the rating period that includes settlement of a contract of sale, rates are typically adjusted at settlement so that the purchaser reimburses the vendor for any rates paid for the period after settlement. This reimbursement reflects the vendor’s pre-payment of rates for the post-settlement period of ownership for which the purchaser would otherwise have been liable. The Commissioner does not consider such payments to be consideration for the transfer of land under section 20(1). However, if a payment to the vendor is for rates referrable to an earlier rating period (that is, a rating period prior to settlement), that payment will constitute consideration for the transfer of the land. 

Date of effect

When finalised, this Ruling will take effect on 1 February 2026:

• Land tax: The Commissioner’s views in this Ruling on assumed land tax amounts apply only to contracts of sale entered into on or after 1 February 2026. 
• Other taxes and rates: The Commissioner’s views in this Ruling on the assumption of other taxes and rates are a restatement of the Commissioner’s existing views.

Disclaimer

Rulings do not have the force of law. Each decision made by the State Revenue Office is made on the merits of each individual case having regard to any relevant ruling. All rulings must be read subject to Revenue Ruling GEN-001.

This is a draft ruling only, and is not available for publication, nor may it be relied upon by taxation officers, taxpayers or practitioners.