Property Wars: Keeping an Eye on Duty

Property Law: 23 March 2019

There are times when clients focus only on getting the deal done. Afterwards they can become acutely aware that there are (stamp) duty consequences if a deal is done the wrong way. Involving a lawyer in the deal making process can often be cost-effective. Introducing one later to help 'clean up the mess,' will sometimes suffice.

The joint venture partners were confident that their development would be a financial success but couldn't get enough pre-sales to secure a construction loan. They decided that they would each enter into off-the-plan Contracts to buy two of the finished apartments.

Off-the-plan Contracts normally attract duty calculated on only the value of the land as at the date of the Contract - not the whole purchase price nor the value of the property when completed. In this way, no duty is payable on the value of the construction work.

When the building was completed, the sales to the joint venture partners settled but no money changed hands.  The joint venturers had lent money into the JV and repayment was forgiven and the joint venturers' entitlements to profits of the joint venture were reduced by the balances of the purchase prices.

The Transfers of Land were lodged by one joint venturer for assessment of duty but the State Revenue Office refused to allow the off-the-plan concession on the basis that no moneys were 'paid' in respect of the construction. Duty of $53,000 was assessed.

Lawyers were engaged to assist and lodged a formal objection to the assessment, arguing among other things that the Duties Act exemption also applied where money was 'payable' and in this instance there was a legally enforceable contract; it did not matter how the parties later chose to satisfy the obligation to pay.

In this 'simple' conveyancing matter, each joint venturer saved duty of $53,000 by employing a lawyer.