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The consideration is what is actually being paid or given to acquire the property. This includes the amount of a monetary consideration and the value of a non-monetary consideration.
When assessing the transaction, other factors could have an effect on the consideration. These are usually noted in the special conditions, however, there are a number of possible dutiable and non-dutiable items that need to be considered.
Even if a contract does provide an apportionment of the values of these non-dutiable items, additional evidence of value will generally be required to support the assessment.
Note: The apportionment must reflect the market value of the non-dutiable items and must not be an attempt to minimise the duty payable.
Under the Taxation Administration Act 1996, it is an offence to knowingly give false or misleading information or omit information.
Often GST is not considered when calculating duty, requiring a re-assessment. This can cause settlement delays.
If a tax default occurs interest will be payable. In addition, penalty tax may be payable.
Where the purchase price is expressed to be GST-inclusive, the amount of GST is not deducted from the consideration for duties purposes.
Where the purchase price is expressed to be GST-exclusive, any additional amount payable by the purchaser in respect of GST in satisfaction of the vendor's liability constitutes additional consideration.
There will be instances where a contract for sale (or a related document) will contain a clause which states the purchase price will reduce to a certain amount, often an incentive provided by the vendor to encourage certain events to occur e.g. early settlement.
A contract is liable to duty on the dutiable value of the property, that is, the unencumbered value or consideration whichever is the greater. If a contract allows the vendor to provide a ‘rebate or offset’ to a purchaser this does not reduce the consideration (purchase price) for the sale of the property. The amount of rebate simply represents the amount the vendor has promised to pay or allow as part of the offer.
Example:
Purchaser A enters into a contract for sale to purchase a new home for a purchase price of $750,000. The vendor offers a $20,000 rebate if the purchasers settle within 6 weeks from the date of exchange.
Duty is calculated on the consideration (purchase price) of $750,000. The settlement date does not change the consideration being paid as agreed by the parties or the unencumbered value of the property when the contract for sale was entered into.
an agreement for the sale or transfer of land which is part of an arrangement relating to the erection of improvements on the land, such as a "house/land package" and a "builder's terms" contract, and
a transfer of land pursuant to such an agreement; and
a transfer of land including improvements made by the transferee.
It is recommended the ruling is referred to for any transactions involving the above scenarios.
A person who is liable to duty is required to provide evidence of value where there is an indication to Revenue NSW that a property is selling for less than market value.
The Chief Commissioner will require evidence of value in the following circumstances:
Not at arm’s length Arm's length transactions are where all parties to an agreement for sale act in their own self-interest and are not subject to pressure from the other party. If there is any indication that this may not be the case, then evidence of value will be required.
Same legal representative/no agent An indicator of a transaction that may not be at being arm’s length, is if the parties are represented by the same legal firm or solicitor, or the parties are dealing with each other directly, without a selling agent.
Associated persons If the parties are associated persons within the definitions in the Duties Act 1997.
Fractional interest If there is a transfer of a partial interest in the property (also described as a fractional interest or part tenancy transfer).
Inadequate Consideration If the consideration is nil, nominal or might not reflect the value of the property being transferred.
Where a portion of the consideration is non-monetary If any part of the consideration is non-monetary (e.g. shares) evidence of value of that non-monetary consideration is required. Evidence of value of the property may also be required.
Unreasonable apportionment If the apportionment of the consideration between non-dutiable and dutiable property does not accurately reflect the market value of the dutiable property e.g. where the consideration for a transaction has been apportioned between dutiable property and non-dutiable property in an attempt to minimise the duty payable.
Where dutiable property is swapped/exchanged If there is a swap or exchange of dutiable property between parties. Evidence of value is required for each property and the contracts/agreements must be submitted to Revenue NSW for assessment.
Date of evidence of value Evidence of value is required as at the date of execution, although evidence of value within 3 months of that date will be accepted in most cases. If the evidence of value is at a date more than 3 months from the date of the dutiable transaction, refer to Revenue Ruling DUT 012 v4 - Evidence of value requirements and guidelines or contact Revenue NSW.
Suitably qualified person The following is an extract from Revenue Ruling FHOG 003 – Valuation of property – suitably qualified person.
For the purpose of section 36A, the following persons are considered suitably qualified to provide evidence of the value of property or consideration:
a member of the Australian Valuers Institute (other than an associate or student member), or
a member of the Australian Property Institute (other than a student or provisional member), who has acquired membership in connection with his or her occupation as a valuer, or
a member of the Royal Institution of Chartered Surveyors who holds the designation "Chartered Valuer" or "Chartered Valuation Surveyor".
Valuations made by any other persons are considered on a case-by-case basis. Please contact us to discuss your specific circumstances.
Market value and GST When a market valuation is submitted to Revenue NSW, it must be:
in the form of a GST inclusive market valuation; and
accompanied by a copy of the instructions given to the valuer in connection with the valuation
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.
Contact the Electronic duties returns (EDR) or Duties team
Should you require further information or support for specific scenarios, contact us:
