Land transfer duty is calculated on the dutiable value of the property. In Commissioner of State Revenue (Vic) v 1043 Melton Highway Pty Ltd [2020] VSC 820, the Supreme Court considered default interest is included in ‘consideration’ for the transfer of dutiable property.
In this case, the taxpayer was the purchaser in a property transaction which required to pay interest on unpaid advances set out in contract as well as ‘default interest’ due to the vendors due to its inability to settle the sale on time. The Commissioner assessed the land transfer (stamp) duty based on the total of the contract price and the default interest.
The Court considered the leading High Court decision, CSR v Dick Smith Electronics Holdings Pty Ltd, on the meaning of ‘consideration’. The High Court observed the ‘consideration’ is rather the money or value passing which moves the conveyance or transfer. The relevant question is whether, when considered as at the date of transfer, it was only in return for the promised additional payment that the vendors were willing to transfer the property.
The Court held that the dutiable consideration included both the interest on the advances as well as the default interest. The default interest was dutiable as, by the time of transfer, it was known that the vendors had received the additional amounts of ‘default interest’ in return for the transfer. That is, the transfer was moved by the promised performance of the stipulation to pay interest on advances and the default interest.
This case shows that taxpayers need to carefully consider what may be included as ‘consideration’ for the transfer of dutiable property. In addition to interest, promises such as assumption of a liability, promise to develop or improve other properties, and promise to provide goods or services may also constitute ‘consideration’.
To discuss further or for more information please contact:
Phil Broderick
Principal
T +61 3 9611 0163 l M +61 419 512 801
E pbroderick@sladen.com.au
