|Ruling number||DUT 012 version 2|
|Date issued||9 July 2018|
|Issued by||Cullen Smythe|
Chief Commissioner of State Revenue
|Effective from||9 July 2018|
Chapter 2 of the Duties Act 1997 (‘The Act’)1 imposes duty on certain transactions (‘dutiable transactions’) affecting specified classes of dutiable property. Duty is charged on the "dutiable value" of the dutiable property the subject of the dutiable transaction.
In general, the dutiable value of dutiable property is the greater of the consideration for the dutiable transaction, and the unencumbered value of the dutiable property (section 21). For the purposes of Chapter 4 of the Act which relates to Landholder transactions, the dutiable value is the unencumbered value of landholdings and goods2. Section 305 authorises the Chief Commissioner to require a person who is liable to duty to provide a declaration by a suitably qualified person3 as to the unencumbered value of the property or to provide such other evidence of that value as the Chief Commissioner thinks fit. The Act does not prescribe the circumstances in which evidence of value will be required.
A decision to require a person liable to duty to provide evidence of value, and the type of evidence required, are at the discretion of the Chief Commissioner. This ruling provides some general guidelines as to when evidence of value will be required, and sets out the types of valuations or other evidence of value acceptable to the Chief Commissioner.
Evidence of value will usually be sought to verify the adequacy of the consideration in the following circumstances:
There is no consideration for the transaction; or
The consideration is non-monetary in nature; or
the parties to the transaction are related or associated persons4, or there is evidence of a broader relationship between the parties or their associates; or
in the case of an agreement for sale, there is no selling agent; or
the same legal or professional firms are acting for both parties; or
the transaction relates to fractional interests in property; or
the Chief Commissioner is not satisfied that the consideration is an adequate indication of the unencumbered value of the property (for example, where the consideration appears low for the type of property being sold).
Where there is monetary consideration for a transaction between unrelated parties, evidence of value will usually only be required if there is some indication that the monetary consideration is less than the unencumbered value of the property. In most cases where the parties to a transaction are unrelated and acting at arm’s length, duty will be assessed on the amount of the consideration.
It is important to determine whether or not the parties are dealing with each other at arm's length. Therefore, any relationship between the parties or their associates is relevant, as associated parties may not act independently in forming their bargain in the same manner that unrelated or non-associated parties would normally do.
Even if there is no relationship between the parties, evidence of value will still be required if the Chief Commissioner is not satisfied that the parties to the transaction have been dealing with each other at arm's length. Examples may include (but are not limited to) situations where:
the consideration for a transaction appears to have been apportioned between dutiable property and other property in an attempt to minimise the duty payable;
consideration appears to have been for income tax planning or accounting reasons and does not reflect the unencumbered value of the assets; or
uncommercial or unusual terms are evident in the transaction.
A liability to duty on a dutiable transaction arises on the date the transaction occurs (sections 12 (1) and 9 (2) (c)). In most cases, this will be the date of first execution of the instrument that effects the dutiable transaction (section 12 (2)). While evidence of value should be provided as at the date of the transaction, acceptable evidence of value within 3 months of that date will generally be accepted. If the evidence of value is at a date more than 3 months from the date of the dutiable transaction, it may be accepted provided there has been no change affecting the value of the dutiable property during that time.
In the case of land, evidence of value more than 3 months and up to 12 months from the date of the transaction may be accepted if accompanied by a statutory declaration stating that no improvements have been effected, nor any zoning changes or lifting of restrictive conditions made by Council, between the date of the valuation and the date of the dutiable transaction. The period of 12 months referred to above may be increased to 18 months at the discretion of the Chief Commissioner depending on the state of the property market and the location of the property. Under the Taxation Administration Act 1996, penalties may be imposed for providing misleading and/or false information.
Where evidence of value of land is required to determine the adequacy of the consideration as outlined in paragraph 7 above, the following will generally be acceptable:
a “declaration by a suitably qualified person” as outlined in paragraph 11; or
a private opinion or expression of value by a suitably qualified person identifying the specific property; or
an agreement which is evidence of a recent arm's length sale of the property; or
a valuation required by a financial institution for finance purposes, with the proviso that such valuations are often conservative and may indicate that the property has a higher unencumbered value.
If this evidence of value indicates that the consideration is adequate, no further evidence of value will generally be required.
If the above evidence of value indicates that the unencumbered value of the land exceeds the consideration, a "declaration by a suitably qualified person" will be required, being either:
a valuation by the Valuer General of the improved land value; or
a valuation by a suitably qualified person of the full market value of the dutiable property, being a comprehensive valuation of the property in its present condition (as at the date of the dutiable transaction or within the parameters outlined in paragraph 8 and 9) indicating that an inspection of the property has been undertaken. Brief market appraisals, estimates of value or other statements that do not indicate a full inspection of the subject property has been undertaken will not be acceptable.
If there is no consideration or nominal consideration, evidence of value must consist of either a "declaration by a suitably qualified person" as referred to in paragraph 10 or an agreement which is evidence of a recent arm's length sale of the property.
Where the property is vacant and unimproved land, the most recent notice of valuation by the Valuer General for rating purposes may be acceptable.
Where the land is the subject of a possessory application under the Real Property Act 1900, section 52 of the Act charges duty on the land value of the land within the meaning of the Valuation of Land Act 1916. An extract of valuation by the Valuer General of the unimproved land value as last determined will be accepted. If not available, a letter from a suitably qualified person as to the unimproved land value will be accepted.
15. A partnership interest is defined in section 11(1) (i) as an interest in a partnership that has partnership property that is dutiable property. Section 21 (4), states that the dutiable value of a partnership interest is to be determined in accordance with section 29, which determines the dutiable value by reference to a proportion of the greater of:
the value of the partnership interest, and
the consideration for the transfer of the partnership interest.
The proportion is determined by reference to the unencumbered value of the dutiable property of the partnership and the unencumbered value of all assets of the partnership.
If an interest in a land-related asset is transferred as a result of the transfer of the partnership interest, the dutiable value of the partnership interest is to be reduced by the dutiable value of the interest in the land-related asset that is transferred, but only if ad valorem duty has been paid or is payable on the transfer of the interest in the land-related asset. Each of the following is a land-related asset:
In some cases, particularly professional partnerships such as those of accountants and solicitors, transactions relate to only small fractional interests in dutiable property. Where the parties are acting at arm's length, duty will be assessed on the full consideration unless the lodging party provides evidence of the values required to determine the proportion. Where the parties are acting at arm's length and there is no consideration, no duty will be payable.
For dutiable property other than land or interests in land, evidence of value will generally not be required unless there is some indication that the transaction is for less than full consideration or that the parties did not deal with each other at arm's length. A declaration by a suitably qualified person will not be required if other reasonable evidence of value is available. For example, where a transaction involves a life estate or remainder estate, the value of the interest passing will be determined using the actuarial life tables to apportion the values of the property between the various interests, if relevant information is supplied by the lodging party (eg, the date of birth of the life tenant and a current valuation of the property). [Note that section 306 of the Act provides that regard may be had to the death of a person having a life estate occurring before the assessment of duty is actually made in ascertaining the value of the interest].
However, if the taxpayer is dissatisfied with the valuation determined on such a basis, or where the Chief Commissioner is unable to determine the value, a more formal valuation will be required, being a "declaration by a suitably qualified person". Such a valuation must be by a person whose business it is to make valuations of the particular class of property in question, such as an accountant, actuary or a suitably qualified person.