A common question we receive is whether, and what sort of, a valuation is required to calculate land transfer duty for related party property dealings.
Land transfer duty, previously known as “stamp duty”, is payable when you buy real property or otherwise acquire an interest in real property in Victoria.
Land transfer duty is calculated on the higher of the price you paid for the property or its market value. Where the parties to a sale and acquisition of a property are dealing independently of each other the Commissioner will generally accept the purchase price as the market value. However, where the transaction is not at arm’s length the Commissioner requires taxpayers to declare the market value and support this with an independent valuation.
The Victorian Commissioner of State Revenue (Commissioner) states that the market value of a property is “the price for which it may be reasonably sold, free from encumbrances, on the open market.”
The Commissioner has recently updated guidance on the use of letters of appraisals by licensed real estate agents as evidence of a property’s value for land transfer duty. As real estate agents are generally not qualified valuers any letters of appraisals provided will not be regarded as formal valuations. Whilst the Commissioner may accept such letters additional information or a formal valuation may be required where:
details relating to the property and its improvements or comparable sales data are not included in the letter of appraisal;
the description of the property in the appraisal letter cannot be reconciled with information held by the SRO;
a planning permit has been issued in respect of the property and the impact of this has not been appropriately factored into the letter of appraisal;
the value for the property provided is at or below its capital improved value at the time of the transaction, and
the value for the property provided is at or below the price that the property last sold for on the open market.
We note that the Commissioner can refer the matter to the Valuer-General if he considers that you have understated the value of your property. In these circumstances the taxpayer may be liable for the cost of the valuation.
To minimise the risk of such further costs and delays in processing assessments, it is best practice for taxpayers to ensure declarations of value are in line with the Commissioner’s guidance.
If you would like to discuss your land transfer duty, please contact our specialist team:
Laura Spencer
Senior Associate
T +61 3 9611 0110 | M 0436 436 718
lspencer@sladen.com.au
Phil Broderick
Principal
T +61 3 9611 0163 l M +61 419 512 801
E: pbroderick@sladen.com.au
Denise Tan
Senior Associate
T +61 3 9611 0160 | M +61 438 714 965
E: dtan@sladen.com.au
Lucy Liang
Graduate Lawyer
E lliang@sladen.com.au
