3 min read
31 Oct 2023
The Ruling further clarifies the SRO’s interpretation of the activities taken by the Commissioner to constitute land development under the sub-sale duty provisions.
While the sub-sale duty regime was introduced as an anti-avoidance measure to prevent land transfer duty from being circumvented when the initial purchaser on-sells to a third party, more often than not, sub-sale duty negatively impacts related parties who are unaware that double-duty could apply through the nomination process if a sub-sale occurs.
The revisions in the Ruling further clarifies the SRO’s interpretation of the meaning of land development under the following limbs:
While the revisions do further clarify the SRO’s interpretation of limbs (a) and (c) of the meaning of land development, the revisions of themselves are relatively minor.
We highlight in summary how the sub-sale duty regime applies and key matters to take note of.
There are 2 broad categories under which sub-sale duty can be triggered, namely:
Sub-sale duty under the additional consideration category is triggered if the subsequent purchaser or associate of the subsequent purchaser provides consideration that exceeds the consideration given/agreed to be given by the first purchaser to the vendor under the sale contract.
The additional consideration category is also triggered if a subsequent purchaser or associate of the subsequent purchaser enters into a “parallel arrangement” within 12 months after the subsequent purchaser obtains a transfer right under the sale contract.
The land development category of the sub-sale duty regime is triggered if land development takes place anytime after the contract is entered into and before settlement of the property takes place.
Land development is broadly defined to include any one or more of the following:
(a) preparing a plan of subdivision of the land or taking any steps to have the plan registered under the Subdivision Act 1988;
(b) applying for or obtaining a permit under the Planning and Environment Act 1987 in relation to the use or development of the land;
(c) requesting under the Planning and Environment Act 1987 a planning authority to prepare an amendment to a planning scheme that would affect the land;
(d) applying for or obtaining a permit or approval under the Building Act 1993 in relation to the land;
(e) doing anything in relation to the land for which a permit or approval referred to in paragraph (d) would be required;
(f) developing or changing the land in any other way that would lead to the enhancement of its value.
Nominations or other arrangements (eg. novation, assignment) where the initial purchaser does not follow through with being the ultimate purchaser of property is not uncommon in property dealings, especially where property development and property investment is envisaged.
Sub-sale duty, particularly in relation to the land development category, does not automatically apply when there is a subsequent purchaser and there are steps, if timed correctly, that could ensure one of the exceptions/exemptions to sub-sale duty applies.
Therefore, prior to effecting a nomination, assignment or novation, it is imperative to obtain legal advice on whether such arrangements will trigger sub-sale duty; which if triggered, will result in two lots of land transfer duty being imposed on the one transfer of land.
Our State Taxation Lawyers are ready to provide you with expert sub-sale duty advice and to guide you in the nomination/novation/assignment processes, including if you are been investigated or have been issued with a sub-sale duty assessment by the SRO.
Speak to one of our state taxation lawyers today for further information on 1300 907 335 or complete an online form or send an email to [email protected] and we will respond promptly.
Disclaimer: This article has been prepared for general information purposes and may not apply to your situation. This information should not be relied upon for legal, tax or accounting advice. Your individual circumstances will alter any legal advice given. The views expressed may not reflect the opinions, views or values of PCL Lawyers and belong solely to the author of the content. © PCL Lawyers Pty Ltd.
If you require legal advice specific to your situation please speak to one of our team members today.
Thomas Abraham is an accomplished senior lawyer with expertise in state taxation advice and litigation. His extensive background and experience make him an invaluable asset to our...
You want to know that you are getting advice and real solutions. You not only want a lawyer who has strong experience and knowledge in legal matters, but a lawyer who can also navigate you through the commercial realities.Request a meeting