The High Court ruled in favour of the Victorian commissioner of state revenue in a case involving high-profile property developer Lend Lease, deciding that the commissioner was entitled to assess $20 million of stamp duty on transfers of land in the Docklands precinct in Melbourne.
According to Pitcher Partners partner Craig Whatman, the High Court’s decision has broader implications for a property developer’s contractual arrangements involving the transfer of land in conjunction with obligations on the purchaser to make payments in addition to the purchase price of the land.
“It is reasonably common for property contractual arrangements to be structured in such a way that the purchaser of the land agrees to make payments in addition to the purchase price of the land or to provide some form of services," he said.
“As occurred in the Lend Lease case, for example, where the sale is being made by a government entity or public authority, the purchaser is commonly required to make contributions to infrastructure and/or to share a portion of the proceeds of sale from the developed land.
“Likewise, in dealings between two private sector entities, one example is where the purchaser may be required to perform specific development works on part of the land, which are then made available to the vendor by way of lease."
The recent decision, according to Mr Whatman, will greatly impact these types of arrangement.
“In all of these cases, it will now be necessary to consider whether the additional payments the purchaser agrees to make over and above the purchase price of the land, or the value of the services they agree to perform for the benefit of the vendor, need to be included as part of the consideration on which stamp duty is payable,” Mr Whatman said.