Landholder duty is a state tax that was introduced to impose duty on acquisitions in landholding entities. 

The ‘economic entitlement’ provisions of the landholder regime are an integrity measure unique to Victoria.  Previously, they applied duty to transactions which provide the acquirer with an economic entitlement that amounts to an interest of 50% or more in a private landholder. This specifically impacts arrangements where developers or builders agree with a landholder to receive 50% or more of the profits or income of a landholder’s land without actually acquiring an interest in the landholding entity.

What has changed?

From 19 June 2019 the measures announced in the Victorian State Budget will apply as follows:

  • it will apply to all landholders who enter into an arrangement for Victorian land valued $1 million or more;

  • there is no percentage threshold – any economic entitlement will trigger duty – eg a 10% economic entitlement will trigger duty on 10% of the value of the land;

This means that the economic entitlement provisions are effectively another head of duty, assessing duty on any arrangement which directly or indirectly includes any of the following participation rights:

  • income, rents or profits derived from the relevant land;

  • capital growth of the relevant land;

  • proceeds of sale of the relevant land; or

  • any amount determined with reference to or entitlement described above.

The provisions include a reference to an economic entitlement being acquired “through another person”, and accordingly it is not necessary to have an agreement directly with the landowner in order for the liability to be triggered.

What does this mean?

Now the economic entitlement provisions are in force, you will need to

  • consider alternatives to the traditional development agreement – including straight sales;

  • structuring development agreements on a cost plus arrangement;

  • considering profit share development agreements when the value of the land is lower;

  • ensure duty is factored in properly in development costs;

  • be careful amending existing development agreements to ensure that amendment does not result in a dutiable economic entitlement.

If you have any queries on how these controversial amendments may impact you, contact us:

Rod Payne
T: 03 5226 8541


Alexander Gulli
T: 03 5226 8573