10. Premium property duty
What is premium property duty?
Under Section 32A of the Duties Act 1997, premium property duty is a higher duty rate that is payable on dutiable transactions relating to residential land, where the dutiable value exceeds the premium threshold.
Each year the premium threshold is adjusted in accordance with the CPI. From 1 July 2024 to 30 June 2025 inclusive, the threshold is $3,636,000.
What is the rate of duty?
The premium duty rate is $7 for every $100, or part, by which the dutiable value for the residential land exceeds the premium threshold. The remainder of the dutiable value of the transaction is liable to duty at the general duty rate under Section 32 of the Duties Act 1997.
How is duty calculated?
The calculation formula from 1 July 2024 until 30 June 2025 is $182,390 plus $7.00 for every $100 over $3,636,000.
All applicable premium rates and duty calculations for each period are located on the calculating transfer duty page.
The transfer of land or business calculator can be used to calculate the general duty and premium property duty payable.
What is residential land?
Residential land is defined under section 32A(3) of the Duties Act 1997 as:
- a parcel of land on which there is one single dwelling or one flat, or a parcel of land on which there is a building under construction that, when completed, will constitute one single dwelling or one flat
- a strata lot, if it is lawfully occupied as a separate dwelling, or suitable for lawful occupation as a separate dwelling, or
- a land use entitlement, if it confers an entitlement to occupy a building, or part of a building, as a separate dwelling, or
- a parcel of vacant land that is zoned or otherwise designated for use under an environmental planning instrument (within the meaning of the Environmental Planning and Assessment Act 1979) for residential or principally for residential purposes.
Note: Despite the definition of residential land under section 32A(3)(a) - 'land on which there is a single dwelling or one flat', land does not cease to be residential land if any building (or part building) is used or occupied for the purpose of another residential occupancy, provided the other residential occupancy is deemed to be an excluded residential occupancy under Section 32A(6) of the Act.
Residential land used for other purposes
Under Section 32B of the Duties Act 1997, where a dutiable transaction in respect of residential land exceeds the premium threshold but the land is used for both residential and other purposes, to determine whether premium property duty is payable the dutiable value must be apportioned between the residential and non-residential components of the land.
If, after apportionment, the dutiable value of the residential component exceeds the premium threshold (referred to as the premium value), duty is payable at the rate of $7 per $100, or part, on the excess above the premium threshold. The remainder of the dutiable value, including the non-residential proportion, is assessed at the general rate in accordance with section 32 of the Duties Act 1997.
Method of apportionment
Where the land is mixed use or mixed development and an apportionment factor has been entered into the Register of Land Values, this factor will be used to determine the apportionment.
Where no apportionment factor has been entered into the register, the Chief Commissioner will either:
- determine an apportionment factor based on what is deemed to be fair and reasonable to reflect the use of the land for non-residential purposes. This will be based largely on information provided by you to Revenue NSW, or
- request the Valuer-General to determine an apportionment factor in respect of the land concerned. This will only be done on rare occasions.
The example below is based on the premium rate applicable from 1 July 2024.
A property comprising a shop on the ground floor and a flat on top is acquired for $10 million.
The apportionment factor, as recorded in the Register of Land Values, is 60% for commercial use and the residential proportion is therefore 40%, equating to $4 million.
Duty is therefore calculated at the rate of $7 per $100 on $364,000 (being the amount in excess of the premium rate) with the remaining $9,636,000 being liable at the general rate.
Use the transfer of land or business calculator to determine the duty payable.
Large parcels of residential land
Under Section 32C of the Duties Act 1997, where a dutiable transaction relates to a parcel of residential land and the area of the land exceeds two hectares, premium property duty will only be payable if the dutiable value of a proportion of the land (the proportion that two hectares bears to the total area of the land being acquired) exceeds the premium rate. This is often referred to as the apportionment factor.
Once apportioned, the dutiable value in excess of the premium rate is liable to duty at the rate of $7 per $100, or part. The remainder of the dutiable value of the transaction is liable to duty at the general rate under section 32 of the Duties Act 1997.
Note: this type of apportionment does not apply where the land is used for both residential and other purposes and apportionment under Section 32B applies.
This example is based on the premium rate applicable from 1 July 2024.
10 hectares of residential land is acquired for $22 million.
The apportionment factor is 2/10, therefore the premium value (PV) is calculated as follows:
PV = (2/10 x $22 million) - $3,636,000 = $764,000
In this example duty will be assessed on:
$21,236,000 at the general rate = $1,150,389
$764,000 at the premium rate = $53,480
Total Duty = $1,203,869.00
Use the transfer of land or business calculator to determine the duty payable.
Other scenarios
Multiple items of land
If a contract for sale or agreement relates to more than one item of residential land the premium rate will only apply if at least one of the items has a dutiable value exceeding $3,636,000.
See section 32A(2B) of the Duties Act 1997.
Scenario
A contract for sale of land for a waterfront property has been entered into for a purchase price of $8,000,000. The contract includes two residences on separate titles. In this instance, a valuation of each residence must be provided and is used to determine the duty payable.
The examples below are based on the premium rate applicable from 1 July 2024.
Residence A is valued at $5,000,000 and residence B is valued at $3,000,000. Residence A is therefore above the premium threshold.
To calculate the amount subject to the premium rate of duty.
Residence A: $5,000,000 - $3,636,000 = $1,364,000 premium rate
In this example duty will be assessed on:
$6,636,000 @ the general rate = $347,389.00
$1,364,000 @ the premium rate = $95,480.00
Total duty: $442,869.00
If, in the same scenario, residence A and B are each valued at $4,000,000, they will each be above the premium threshold.
To calculate the amount subject to the premium rate
$4,000,000 - $3,636,000 = $364,000 premium rate
$4,000,000 - $3,636,000 = $364,000 premium rate
Total premium rate = $728,000
In this example duty will be assessed on:
$7,272,000 @ the general rate = $382,369.00
$728,000 @ the premium rate = $50,960.00
Total duty: $433,329.00
Aggregation of dutiable transactions
Under Section 25 of the Duties Act 1997, aggregation of dutiable transactions may apply when you have two or more transactions that form part of what is essentially one larger transaction.
If any of the transactions are subject to premium property duty, they are not to be aggregated and are to be assessed on an individual basis.
The example below is based on the premium rate applicable from 1 July 2024.
Three contracts have been entered into between the same vendor and purchaser for adjoining properties and are considered one arrangement under the Duties Act:
Contract 1: Residential house with a purchase price of $4,000,000
Contract 2: Vacant residential with a purchase price of $1,500,000
Contract 3: Vacant residential land with a purchase price of $1,400,000
Contract 1: Subject to premium property duty and excluded from the aggregation provisions.
Contracts 2 & 3: Not subject to premium property duty as they are under the premium threshold but are aggregated contracts. Duty will be calculated on the combined dutiable value of $2,900,000.
Lodgement requirements
As specified in the Duties document matrix agreements subject to the premium rate for residential land under section 32A can be processed on EDR.
Agreements for residential property that is used for other purposes under Section 32B and large parcels of residential land under section 32C must be lodged via eDuties for assessment using:
Application type – ‘Assessment - premium property Section 32B and 32C.
Contact the Electronic duties returns (EDR) or Duties team
Should you require further information or support for specific scenarios, contact us:
EDR
Duties
