The sub-sale provisions in the Duties Act 2000 (the Act) apply to treat certain transfers as sub-sales of land. In such circumstances, the transfer will be taken to represent more than one transfer and can be charged multiple lots of duty. Relevantly, the sub-sales provisions may apply where transfers:
- involve additional consideration
- involve land development
- result from options.
Definitions that only apply to sub-sales
What is a sub-sale?
The sub-sales provisions apply to a transfer of land where:
- A person (the vendor) enters into a contract (the sale contract) to sell or transfer the property to another person (the first purchaser).
- A subsequent purchaser obtains the right (transfer right) to have the property (or any part of it) transferred to them, on completion of the sale contract.
- Any one of the following occurs:
- The subsequent purchaser, or an associate, gave or agreed to give additional consideration to obtain the transfer right, or
- Land development occurred in relation to the property between the date of the contract and the date of the transfer.
- The vendor transfers the property (or any part of it) to the subsequent purchaser.
In such circumstances, duty will be charged separately on:
- the dutiable value of the sale contract as if the contract had been completed by the first purchaser
- the dutiable value of the subsequent transaction by which the subsequent purchaser obtained the transfer right
- the dutiable value of any other subsequent transactions, if any.
Option
The sub-sales provisions apply to the transfer of land where:
- The owner of the property (the vendor) grants an option, or is granted an option by, another person (the first purchaser) to enter into a contract of sale of the property or to transfer the property.
- A subsequent purchaser obtains the right or assumes the obligation to enter into the contract of sale or to have the property (or any part of it) transferred to them (transfer right).
- Any one of the following occurs:
- The subsequent purchaser, or an associate, gave or agreed to give additional consideration to obtain the transfer right; or
- land development occurred in relation to the property after the option was granted, but before the property is transferred.
- The vendor transfers the property (or any part of it) to the subsequent purchaser.
An option refers to ‘put options’, ‘call options’ and 'put and call options' in their usual commercial sense.
First purchaser
- the person who entered the contract of sale with the vendor of the property
- the person who was granted an option over the property by the vendor or granted a put option to the vendor.
Subsequent purchaser
- the person who obtains the right to have all or part of the property transferred to them, either from the first purchaser or a previous subsequent purchaser
- a subsequent purchaser can also be a first purchaser who obtains the right to have the property transferred to them in a different proportion to that listed in the contract or the option.
Transfer right
- the right to have the property, or any part of it, transferred on completion of the sale contract.
- the right or obligation to enter into a sale contract for the property, or to obtain a transfer of the property, or any part of it
- a transfer right can be given by the first purchaser (which can include an option holder) or a subsequent purchaser
- the right can be obtained by nomination, assignment, novation or other arrangement.
Relatives
In certain circumstances an exemption can apply where a subsequent purchaser is a relative of the first purchaser or a fixed trust the only beneficiaries of which are relatives of the first purchaser. Section 3(1) of the Duties Act 2000 defines relative as:
- a child or remoter lineal descendant of the person or of the partner of the person
- a parent or remoter lineal ancestor of the person or of the partner of the person
- a brother or sister of the person or of the partner of the person
- the partner of the person or a partner of any person referred to in the first three bullet points above
- a child of a brother or sister of the person or of the partner of the person
- a brother or sister of a parent of the person or of a parent of the partner of the person.
Associate
Associate means an ‘associated person’ of a person, or anyone acting in concert with the person. This definition includes, but is not limited to:
- related persons (see below)
- natural persons in a business partnership
- companies if they have common majority shareholders or they have common minority shareholders that if aggregated would hold a mjority of shares in each company
- companies if the shares in the companies are 'stapled'
- trustees and trusts with common beneficiaries
- a company and a trustee if the company or a related body corporate is a beneficiary of the trust.
Related persons include, but are not limited to:
- natural persons who are relatives
- companies that are related bodies corporate
- a natural person and a company where the person is a majority shareholder or director of the company or of a related body corporate of the company
- a natural person and a trustee of a trust are related persons if the natural person is a beneficiary of the trust (not being a public unit trust scheme)
- a company and a trustee of a trust are related persons if the company, or a majority shareholder or director of the company, is a beneficiary of the trust (not being a public unit trust scheme).
Parallel arrangement
A building contract or other arrangement entered into by a subsequent purchaser (or an associate), before, at the time of, or after obtaining a transfer right, under which the first purchaser (or an associate of either) is to construct, or arrange construction of, building works on the land for consideration. Where a subsequent purchaser enters into a parallel arrangement that person is taken to have given or agreed to give additional consideration for the purpose of the sub-sale provisions. The definition can apply where the person who agrees to construct or arrange the construction is an earlier subsequent purchaser (or an associate).
Additional consideration
- any consideration given, or to be given, by the subsequent purchaser (or an associate) in order to obtain the transfer right (other than reimbursement of ‘excluded costs’) that exceeds the consideration that was to be given by the first purchaser (or the previous holder of the transfer right) to the vendor. The means:
- if the subsequent purchaser obtained the transfer right from the first purchaser – consideration that exceeds the consideration provided under the sale contract, other than excluded costs
- if the subsequent purchaser obtained the transfer right from another subsequent purchaser – consideration that exceeds the consideration given or agreed to be given by that other subsequent purchaser in order to obtain the transfer right, to the extent that the consideration relates to the first-mentioned transfer right, other than excluded costs
- if a subsequent purchaser (or an associate) entered into a parallel arrangement, by entering into of the parallel arrangement the subsequent purchaser is taken to have given, or agreed to give, additional consideration.
Land development
Land development is not limited to physical changes to the land but includes key steps in the planning process. It is defined as follows:
a. Preparing a plan of subdivision or taking any steps to have the plan registered under the Subdivision Act 1988 (Vic).
b. Applying for or obtaining a permit under the Planning and Environment Act 1987 (Vic) in relation to the use or development of the land.
c. Requesting under the Planning and Environment Act 1987 (Vic) that a planning authority 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.
Find more information on what constitutes land development.
Excluded costs
- legal costs or other fees or charges, including reasonable selling agents’ fees and any statutory fees or charges
- survey or valuation payments
- GST except where an input tax credit or reduced input tax credit is available
- any other costs that, in the opinion of the Commissioner of State Revenue, were reasonably incurred by the first purchaser (or the previous holder of the transfer right).