Victorian Government - Proposed Imposition of Stamp Duty on Adjustments made for Land Tax and Windfall Gains Tax

The Commissioner of State Revenue has released draft revenue ruling, Draft-DA-70: Land Transfer Duty – Consideration – Assumption of Tax Liabilities (Draft Ruling) seeks to impose land transfer (stamp) duty on adjustments made for certain taxes at settlement of a property transaction, by treating those adjustments as dutiable consideration.

Impact of Draft Ruling

Historically, adjustments made between a vendor and purchaser at settlement of a property transaction, including adjustments for land tax and windfall gains tax, have not been regarded as ‘consideration’ for the purposes of land transfer (stamp) duty and therefore, do not currently form part of the dutiable value of the property.

The current position is that adjustments made at settlement between the parties are merely reimbursements. Following settlement, the vendor does not have the benefit of amounts paid in advance for periods extending beyond the settlement date. It is reasonable that that the vendor be appropriately reimbursed by the purchaser for these amounts.

The Draft Ruling departs from this long-standing position. It proposes to expand the interpretation of ‘consideration’ contained in section 20(1) of the Duties Act 2000 (Vic) (Act), noting that consideration is not expressly defined by the Act. Under the Draft Ruling, the following adjustments will now be treated as consideration where payment by the purchaser is required for settlement to occur:

1. Land tax

1.1. Where a contract of sale requires the apportionment of land tax between the parties, and settlement would not occur without the purchaser making payment to the vendor in respect of that adjustment, the amount paid to meet, or contribute to, the vendor’s land tax liability will be treated as consideration.

1.2. Notably, from 1 January 2024, adjustments for land tax are only permitted where the:

1.2.1. parties to the contract of sale expressly agree to the adjustment; and

1.2.2. purchase price exceeds the threshold set under section 10G of the Sale of Land Act 1962 (Vic) (SLA), currently $10.7 million inclusive of GST.

1.3. By way of background, land tax is assessed on a full year basis on all taxable land under section 7 of the Land Tax Act 2005 (Vic). Where permitted under the SLA, land tax adjustments have recognised the principle that land tax is a tax on land holding.

2. Windfall Gains Tax

2.1. Adjustments for windfall gains tax (WFG) are permitted under section 10H of the SLA.

2.2. A consistent approach is taken, namely that the Draft Ruling proposes that where a purchaser is required to contribute to the vendor’s WFG liability as a condition of settlement, then the amount paid by the purchaser in respect to the WFG adjustment will also be treated as dutiable consideration.

2.3. Section 10H of the SLA preludes an adjustment between the parties for an existing WFG liability. An adjustment is only permitted in respect of a potential future WFG liability, such as where the land is rezoned after the contract has been entered into, but prior to settlement.

2.4. The Draft Ruling would require purchasers to pay land transfer (stamp) duty on an adjustment for WFG paid to the vendor at settlement.

3. Congestion Levy

3.1. A contract of sale may provide that the purchaser agrees to assume all or part of the vendors congestion levy, pursuant to the Congestion Levy Act 2005 (Vic), and in turn stipulate an amount due to the vendor at settlement.

3.2. The Draft Ruling adopts the view that where settlement would not occur without payment of the adjusted amount, that amount constitutes consideration paid under the contact and is therefore subject to land transfer (stamp) duty.

The Commissioner does not intend on treating adjustments for council rates paid by the vendor that relate to periods after settlement as ‘consideration’ under the Draft Ruling. This position is notable given that council rates, like land tax, are both taxes imposed for holding land.  

The test the Commissioner proposes to adopt is whether payment of the adjusted amount is something without which the vendor would not transfer the land. If the settlement would not occur unless the purchaser pays the adjustment amount, that payment will be classed as consideration under the Act.

When is the Draft Ruling proposed to take effect?

The date on which the Draft Ruling is come into effect is still to be confirmed. However, parties negotiating contracts for the sale of land should consider the potential application of the Draft Ruling.

Conclusion

The Draft Ruling has the potential to increase land transfer (stamp) duty, with commercial property transactions likely to be most significantly affected.

Public consultation closed on 24 December 2025, if the Draft Ruling is finalised in its current form, purchasers will need to carefully assess the land transfer (stamp) duty implications of contractual provisions which require them to assume or contribute to land tax, WFG, or congestion levies of vendors.

Alasdair Woodford
Principal
T: 03 5225 5217 | M: 0436 456 144
E: awoodford@ha.legal

Joseph Flanagan
Senior Associate
T: 03 5226 8504 | M: 0491 307 550
E: jflanagan@ha.legal

Tayla Berger
Senior Associate
T: 03 5226 8559 | M: 0407 825 365
E: tberger@ha.legal