On 20 July 2026, the State Revenue Office (SRO) published Ruling DA-070, Land transfer duty – Assumed tax amounts (the Ruling).
The Ruling changes the way that ‘consideration’ under a contract of sale is calculated for the purpose of assessing transfer (stamp) duty on property transactions, to include certain tax settlement adjustments as part of the consideration for transactions.
The impact of this Ruling is that stamp duty payable on property transactions will increase, putting further pressure on property investors in Victoria. Effectively, the SRO will now be empowered to impose a tax on other taxes that it is already collecting, which is an illogical and inappropriate result.
Overview of stamp duty
The Duties Act 2000 (Vic) imposes stamp duty on the transfer of dutiable property, which includes land.
Duty is calculated on the ‘dutiable value’ of the property, which is defined as the greater of:
- the ‘consideration’ for the dutiable transaction; and
- the unencumbered value of the dutiable property.
The ‘consideration’ for the dutiable transaction would typically equate to the purchase price under the contract of sale. Typically, where a purchaser assumes certain liabilities as part of a sale transaction, the assumption of those liabilities may be included as ‘consideration’ for the transaction (e.g. if the purchaser is obliged to pay employee entitlements, or pay a commission to the real estate agent on the sale). The result is that higher stamp duty will be payable by the purchaser, due to the increase in ‘consideration’, upon which duty is calculated.
Case law has established that ‘consideration’ is not necessarily only the sale price stated in a contract of sale; rather, it is the ‘money or value passing which moves the conveyance or transfer’ (CSR v Lend Lease Development Pty Ltd). The issue is 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, on which duty is calculated.
However, the SRO has now taken an extremely broad view of what constitutes ‘consideration’ for a dutiable transaction. Under the Ruling, the principle of what ‘moves’ a transfer of land now automatically includes certain settlement adjustments (defined in the Ruling as ‘Assumed Tax Liability Amounts’). This is an overreach and, in our view, extends well beyond what is expressed in established case law as constituting consideration for the transfer of land.
What Assumed Tax Liability Amounts will constitute ‘consideration’?
The Ruling focuses on four taxes:
- land tax;
- windfall gains tax;
- congestion levy; and
- municipal rates.
Each tax may constitute an Assumed Tax Liability Amount in the circumstances discussed below.
Land tax
Since 1 January 2024, land tax adjustments have been abolished in Victoria, under contracts of sale where the sale price is below the ‘threshold amount’ (currently $10,700,000, which is indexed annually).
A provision of a sale contract that requires a purchaser to pay an amount of land tax which the vendor is liable for, where the sale price is below the threshold amount, is void and of no effect. Accordingly, an amount purportedly payable by the purchaser under such a provision cannot ‘move’ a transfer of land and does not constitute consideration.
However, if the sale price of land is at or above the threshold amount, and the purchaser is required to pay an amount calculated towards the vendor’s tax liability at or before settlement, that amount payable by the purchaser constitutes ‘consideration’ for the transfer of land.
Windfall gains tax
Since 1 January 2024, vendors cannot pass on a known windfall gains tax (WGT) liability to purchasers under a contract of sale or option agreement. Any provision attempting to do so is void and of no effect. Accordingly, an amount purportedly paid by a purchaser under such a provision cannot ‘move’ a transfer of land and is not consideration for the transfer.
However, where no WGT liability exists when a contract of sale is executed, the parties may agree that if a WGT liability arises before settlement (i.e. due to the rezoning of the land in the interim), the purchaser will provide an amount towards the vendor’s WGT liability. In those circumstances, that amount will form part of the consideration for the transfer of the land, in addition to the sale price under the contract.
Congestion levy
Under the Congestion Levy Act 2005, the owner of a car park in the levy area is liable, annually, to pay the levy imposed on the leviable parking spaces on the land.
Where a car park is sold under a contract of sale, the purchaser may agree under the contract to provide an amount towards the vendor’s congestion levy liability. That amount forms part of the consideration for the transfer of the land, in addition to the sale price.
Municipal rates
The SRO accepts that when a purchaser reimburses the vendor for the vendor’s pre-payment of rates for the post-settlement period, this reimbursement is not consideration for the transfer of land. This is because the purchaser would have otherwise been liable to pay all current rates, upon becoming the owner of the land (pursuant to the Local Government Act 1989).
In contrast, if the purchaser reimburses the vendor for the vendor’s payment of rates for a rating period prior to settlement, this reimbursement is consideration for the transfer of land.
Summary — Assumed Tax Liabilities that constitute consideration
| Levy | Consideration — Duty payable | Not consideration |
| Land tax | If the sale price is at or above $10,700,000 and the purchaser is required to pay a portion (or all) of the vendor’s land tax liability for the tax year including settlement. | If the sale price is below $10,700,000, a provision requiring adjustment is void and cannot ‘move’ a transfer of land. |
| WGT | Where no WGT liability exists when the sale contract is executed and the purchaser agrees to pay an amount towards the vendor’s anticipated WGT liability that may be levied by settlement. | If a WGT liability exists when the sale contract is executed, a provision requiring the purchaser to contribute to the WGT is void and cannot ‘move’ the transfer of land. |
| Congestion levy | Where a car park is sold under a contract of sale and the purchaser agrees to pay an amount towards the vendor’s congestion levy liability. | N/A — the purchaser’s payment towards the congestion levy is always consideration. |
| Municipal rates | Where the purchaser reimburses the vendor for the vendor’s payment of rates for a rating period prior to settlement. | The purchaser reimburses the vendor for the pre-payment of rates for the post-settlement period. |
Date of effect
The Commissioner’s views regarding land tax and congestion levy apply to contracts of sale that are executed from 17 August 2026.
The Ruling otherwise restates the Commissioner’s ‘existing views’ regarding WGT and municipal rates. This effectively means the views regarding WGT and municipal rates have retrospective effect, which will enable the Commissioner to reassess transactions within a five-year amendment period, as permitted in section 9 of the Taxation Administration Act 1953.
Policy concern — a tax on a tax
From a policy perspective, it is difficult to justify an outcome where one state tax (land tax, WGT and congestion levy) increases the liability for another state tax (stamp duty).
The Commissioner’s view that reimbursements of state tax liabilities constitute consideration for dutiable transactions will increase stamp duty payable, directly by reference to taxes imposed by the SRO itself. This results in a layering of State taxes that extends the duty base well beyond the negotiated value of the subject property.
Rather than duty being calculated solely by reference to the stated consideration in the contract of sale or the dutiable value of the property, the duty base is expanded by taxes imposed and administered by the SRO itself.
The concept of a ‘tax on a tax’ is not new, for example, stamp duty has generally always been calculated on the GST-inclusive purchase price of land. While undesirable, this is at least explicable in that the interactions between the federal taxation regime and state taxation regime produced adverse results.
The Ruling may be viewed as an opportunistic way to increase stamp duty by an ‘interpretation’ of what constitutes ‘consideration’, rather than via legislative change which would otherwise be unpalatable in the current climate given we are in an election year, and given that Victorian landowners are already subject to a vast array of property taxes.
Settlement adjustments are not part of the purchase price
In addition to the above policy concerns, the Ruling is an overreach in terms of contending that settlement adjustments, or assumptions of tax liabilities, form part of the purchase price as they ‘move’ the transfer of land.
On the contrary, generally such adjustments merely allocate liabilities between the parties. Economically, if a vendor has prepaid land tax and settlement occurs halfway through the calendar year, the purchaser will reimburse the vendor simply because the purchaser will enjoy the benefit of the property for the remainder of the year. Such a reimbursement is not paid by the purchaser to induce the vendor to transfer the land — it simply ensures that each party bears the correct share of an outgoing.
Similarly, where a purchaser pays an amount towards a vendor’s WGT liability that is levied prior to settlement, this recognises that the purchaser will receive the ultimate economic benefits from the development of the rezoned land. Assuming the vendor has deferred the WGT liability upon receiving an assessment, the sale to the vendor will then trigger payment of this liability, to which the vendor can satisfy with payment of the funds contributed by the purchaser.
New Ruling adds complexity and creates potential for challenge
The new Ruling signals that the SRO will take a hardline view and treat all the above adjustments as forming part of the consideration for each dutiable transaction. This will add further complexity to property transactions, where final settlement adjustments are often agreed a few days prior to settlement. This timing may make it difficult to accurately calculate the purchaser’s stamp duty liability prior to settlement, resulting in higher financing and transaction costs.
The Ruling does not have the force of law, and we consider there will be grounds to challenge the SRO’s purported application of the Ruling, as it has a flawed basis. We have successfully represented various taxpayers in challenging the SRO during investigations, audits and objections.
Contact us
If you would like further information on the new Ruling or would like to discuss your specific circumstances, please contact Tamara Cardan, Special Counsel — Tax, on +61 3 9321 7862.
Reference: Commissioner of State Revenue v Lend Lease Development Pty Ltd [2014] HCA 51.
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