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Property professionals guide: Contracts for sale of land
Transfers in conformity/not in conformity
Transfers can be in conformity or not in conformity with an agreement for sale. Understand the differences and how this effects transfer duty.
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Where there is a contract for sale of land and a transfer, the contract sets out the conditions of the purchase. It attracts transfer duty at the general rate based on the dutiable value of the property.
The transfer gives effect to the transfer of the title of the property. If the transfer is in conformity with the contract, it attracts a fixed duty of $20 under section 18(2) of the Duties Act.
Transfers in conformity Section 18(2)
In conformity means the following:
the property described in the transfer is the same as the property agreed to be sold or transferred in the agreement, and
the transferee and transferor in the transfer are respectively identical to the purchaser and the vendor on the agreement, and
the interest/share in the property acquired by each purchaser on the agreement is identical with the interest/share in the property that is actually transferred to each transferee, and
the consideration in the transfer is the same as the purchase price in the agreement.
The duty chargeable in respect of a transfer made in conformity with a contract for the sale is $20 if the duty chargeable in respect of the contract has been paid.
A transfer to a person who is not the purchaser named in the agreement (and where the property, consideration and parties are otherwise in conformity) will be considered to be in conformity with the agreement where the specific circumstances detailed in Clause 10 of Revenue Ruling DUT 010 Version 2 - Transfers pursuant to an agreement for the sale or transfer of dutiable property are met.
Transfers not in conformity Section 18(3)
In limited circumstances, where the transferee and purchaser are not the same person or where the interest being transferred differs from that shown in the contract, fixed duty of $20 may still apply as though the transfer is in conformity with the agreement in accordance with section 18(3) of the Duties Act 1997.
Under this section, the duty chargeable in respect of a transfer of dutiable property that is not made in conformity with an agreement for the sale or transfer of the dutiable property is $20 if all four requirements below are met:
the duty chargeable in respect of the agreement has been paid, and
the transfer would be in conformity with the agreement if the transferee was the purchaser under the agreement, and
the transfer occurs at the same time as, or approximately with, the completion or settlement of the agreement, and
at the time the agreement was entered into, and at the completion or settlement of the agreement:
the purchaser under the agreement (other than a purchaser who purchased as a trustee) and the transferee under the transfer were related persons, or
if the purchaser purchased as a trustee (other than as a trustee of a self managed superannuation fund) - the transferee and the beneficiary were related persons, or
if the purchaser purchased as a trustee of a self managed superannuation fund - the transferee under the transfer was the custodian of that trustee.
Important note
Requirement 4 means that all purchasers and transferees must be related at two specific points in time: when the agreement is entered into and when it is completed. If the entity did not exist or the individuals were not related at either of these times, this requirement cannot be satisfied.
If a transfer not in conformity does not meet all the above criteria, transfer duty will be payable on the value of the interest being assigned in the transfer.
Transfers in partial conformity
Section 64C of the Duties Act 1997 also provides for a duty concession in respect of a transfer of dutiable property that is made in partial conformity with an agreement for the sale or transfer of the property.
The concession applies if the interest in the property transferred to the transferee is not identical to the interest agreed to be sold to the purchaser under the agreement. Whenever the interest acquired by a transferee under the transfer is different from those agreed to be sold or transferred under the contract, the transfer is not considered to be in conformity.
Duty is to be charged only on the excess proportion of the dutiable value of the dutiable property transferred.
Transactions liable to transfer duty at the general rate
The following circumstances provides examples of when transfer duty at the general rate could be payable when a transfer is not in conformity with the contract and does not meet the criteria for the nominal duty provisions of Section 18(3).
Transfers to entities/companies yet to be formed
Section 18(3) of the Duties Act 1997 cannot be satisfied if the transferee entity did not exist at the time the agreement for the sale was entered into.
For example, an agreement with a purchaser acting on behalf of a company to be formed, where the company is not named or identified, and where there is no novation, the transfer to the company will be liable to transfer duty at the general rate.
More information can be found in the following Revenue Rulings:
Revenue Ruling DUT 011: Agreements for the Sale or Transfer of Dutiable Property - Cancelled Agreements (For information on novation of contracts see paragraph 4 and 5)
Public unit trust schemes and discretionary trusts
It is important to note under the Duties Act related person definition that the following are not considered related persons:
a natural person and a trustee, where the trust is a public unit trust scheme or discretionary trust
a private company and a trustee, where the trust is a public unit trust scheme or discretionary trust.
Common scenarios
Here are some common scenarios relating to transfers that are in or not in conformity. To demonstrate how duty is calculated, the dutiable value in each scenario is $500,000.
Purchaser A and Purchaser B as tenants in common in equal shares (not related to each other).
Transferee
Purchaser A as to 25%.
Purchaser B as to 75% as tenants in common in unequal shares.
Result
Section 18(3) does not apply as the purchaser and transferees do not meet the definition of related persons at the time of entering into the contract.
Duty is calculated on the contract based on the dutiable amount of $500,000, and
Duty is also payable on the transfer based on the dutiable value of $125000 (additional 25% of $500,000 transferring to purchaser B).
Transfer not in conformity
Purchaser
Purchaser A and Purchaser B as joint tenants (de facto partners).
Transferee
Purchaser A (no longer in a de-facto relationship with purchaser B).
Result
Section 18(3) does not apply as the purchaser and transferees no longer meet the definition of related persons at the time of the transfer.
Duty is calculated on the contract based on the dutiable value of $500,000, and
Duty is also payable on the transfer based on the dutiable value of $250000 (additional 50% transferring to purchaser A).
Lodgement requirements
As specified in the Duties Document Matrix (PDF, 403.7 KB) most transfers not in conformity can be processed on EDR, excluding transfers made in partial conformity.
