High Court determines the correct method of calculating stamp duty
By Evelyn Marcou, Senior Associate, MST Lawyers
The recent High Court decision of Commissioner of State Revenue (Vic) v Lend Lease Development Pty Ltd  HCA 51 has confirmed the way consideration is to be assessed when determining how much duty is assessable.
Summary of Facts
- Various Lend Lease related entities (collectively referred to as Lend Lease) entered into arrangements with the Victorian Urban Development Authority (VicUrban) for the transfer of land situated in the Docklands region in Melbourne.
- A Development Agreement entered into between Lend Lease and VicUrban outlined a number of mutual and interconnecting undertakings for the completion of development works and the transfer of land in the Docklands area. Lend Lease was obliged to develop and sell the land it acquired from VicUrban and the parties would share in the proceeds of the sale of developed lots to third parties. Lend Lease was also required to contribute towards VicUrban’s costs of constructing infrastructure, remediating previously unused sites and erecting public art work.
- The development was conducted in stages, and the transfer of each stage to Lend Lease was subject to a separate Land Sale Contract in a form that was annexed to the Development Agreement.
- The Victorian Commissioner of State Revenue (the Commissioner) assessed duty on the land transfers on the basis that the consideration comprised the agreed purchase price under the Land Sale Contracts and the amounts that Lend Lease contributed towards VicUrban’s costs in relation to infrastructure and construction works under the Development Agreement.
- The matter found its way to the High Court of Australia, with the Court unanimously allowing the Commissioner’s appeal.
The High Court ruled in favour of the Commissioner of State Revenue (Vic). The reasoning behind the decision was based on the fact that ‘but for’ the additional payments for improvement on the land, there would not have otherwise been a conveyance of land and as such, the true consideration that ”moved” the land was a combined value of both the land and the payments for the infrastructure works.
The court found that the true consideration used to calculate dutiable value was to be based upon the combined value of both the land and the payment of the infrastructure works to be done to it. The court based its reasoning on what aspect of the agreement caused the property to ‘move’ to Lend Lease when determining consideration.
The Practical Implications
In each and every transaction, a thorough consideration of the circumstances surrounding the transaction needs to be undertaken to assess whether or not the totality of the arrangements have been considered and whether this affects the dutiable value. It will be important to ensure that future transactions are documented in such a way that unintended stamp duty and tax consequences do not flow from the transaction structure. It remains to be seen how aggressively the relevant Commissioners will apply the High Court’s approach in practice.