The Victorian State Revenue Office has issued a draft revenue ruling “Land transfer duty - Consideration - Assumption of tax liabilities” for comment that seeks to impose a land transfer (stamp) duty on adjustments on land tax and windfall gains tax at settlement of property transfers. This is an Australian first position and will penalise commercial and other property transfers.

New stamp duty charge from 1 February 2026

The new draft ruling applies for contracts for the sale of land from 1 February 2026.

Under the State Revenue Office’s draft ruling – any adjustment of land tax between buyer and seller will now be subject to stamp duty.

A buyer must pay up to 6.5% stamp duty as a levy on any adjusted land tax paid to the vendor.

This is an absurd result, the State Revenue Office is now seeking to get a tax imposed on a tax that it is already collecting.

Absurdly, this does not apply to rates (according to the State Revenue Office) – even though adjustments of rates occur on exactly the same basis as land tax adjustments.

Application to land tax

Under a change in law from 1 January 2024, land tax adjustments have been abolished for all land sale contracts where the sale price is less than $10,400,000 (as at 1 January 2025) inclusive of GST.

However, adjustments are still available if provided for in the contract of sale and the purchase price is above the threshold amount.

Historically, adjustments on settlement have been recognised as not contributing towards the consideration paid for the sale of land. This is typically because they reimburse the vendor or buyer for payments made before or after settlement that benefit the other side. This is the State Revenue Office’s current position (prior to the draft ruling) and the draft ruling carries through this position for rates.

Land tax is imposed in Victoria in respect of a year – section 7 of the Land Tax Act 2005 (Vic) confirms this:

7 General imposition of land tax

Land tax is imposed in respect of each year on all taxable land in Victoria.

Therefore, like rates, it is effectively a tax on ownership of land throughout a year. While the Land Tax goes onto administratively confirm that a single assessment is issued based on ownership at 31 December of the previous year – land tax, like rates, is a tax on holding land.

The adjustment of land tax between a buyer and seller on settlement is merely to compensate the vendor for the land tax paid for the period of time which it does not hold the property. It is clearly not consideration for the transfer of land – as the land would still be transferred for the same purchase price if the land was exempt from land tax or the land tax was a different amount.

Further, this new tax creates an odd scenario where a delay in settlement within a calendar year will result in a lower land tax apportionment and a reduced stamp duty amount for the buyer.

Application to windfall gains tax

While existing windfall gains tax liabilities cannot be adjusted, potential future ones can. For example, where the land is rezoned after the contract is signed but before settlement.

If you thought losing 50% of a gain in tax was not bad enough, now purchasers will have to pay stamp duty on amounts of windfall gains tax they have to adjust in favour of the vendor.

In essence, it’s a windfall to the revenue.

An adjustment of windfall gains tax is typically an apportionment between the gain received by the vendor and the gain received by the purchaser. That is, it simply a mechanism for ensuring the person who makes the gain pays the tax. Therefore, it is unfair for stamp duty to be paid on a commercial adjustment.

Application to the congestion levy

Likewise, any adjustments by the purchaser to a vendor for congestion levies will trigger stamp duty under the SRO’s draft ruling.

Conclusion

As consultation expires on 24 December 2025, it is hoped that this may be removed from the final ruling.

However, if is not changed – all buyers signing contracts for the sale of land above $10 million, a windfall gains tax liability or congestion levy will have to take into account the stamp duty implications of paying the vendor’s taxes.

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Please contact us with any questions on State Tax issues.

Phil Broderick
Principal
T +61 3 9611 0163 l M +61 419 512 801
E pbroderick@sladen.com.au

Nicholas Clifton
Principal Lawyer
T +61 3 9611 0154 | M +61 401 150 955
E nclifton@sladen.com.au