The Victorian government has moved to simplify the administration of the off-the plan and refurbished lots duty concessions. The changes should reduce the cost and administrative burden on developers. However, the new record keeping requirements and the imposition of joint & several liability will need to be carefully managed by developers.

The State Taxation Acts Amendment Act 2008 2008 (which received royal assent on 17 June 2008) made some important changes to the off-the-plan and refurbished lots duty concessions in subsections 21(3) and 21(4) of the Duties Act 2000 (Act). The new rules apply to contracts of sale entered into on or after 1 October 2008.

These concessions provide that the consideration (for duty purposes) for the transfer of a lot does not include any amount in respect of construction or refurbishment costs after the date the contract of sale was entered into.

The changes have been made as a result of a 2007 State Revenue Office (SRO) review of the concessions ( click this link to view ). The object of the review was to determine whether the concessions could be simplified to provide greater certainty and transparency for developers, builders, real estate agents and home purchasers. The SRO statutory declarations and calculations that are currently required are complex and time consuming.

The changes, principally contained in new sections 21A to 21E of the Act, can be summarised as follows:

  • In calculating the percentage of the building works component in a contract of sale, the parties will have the option to use a fixed percentage for the land component and building component (with different percentages applicable to different building types). Percentage amounts are to be periodically published in a Revenue Ruling.
  • The parties will be able to calculate building works in 10% increments (to overcome the difficulty in determining exact percentages of building works completed as at the date of contract).
  • A 'whole of project' calculation approach will apply for multi-unit refurbishments. For example, in the case of multi–unit developments, the concession will be based on whole of project (or stage) building works completion figures and not on figures that relate exclusively to a particular lot. This acknowledges the difficulty in providing accurate calculations relating to a particular lot at a given point in time and reflects the reality that costs attributable to common areas (e.g. stairwells) ought to be included. The calculation methodology to be adopted to quantify different sized (valued) lots is to be published in a Revenue Ruling.
  • The information/evidence that purchasers must provide to the SRO to obtain the concessions is listed in new section 21(4A). This includes, among other things, a copy of the building permit/approval and a statutory declaration by the vendor. We expect that the existing SRO statutory declarations will be updated in due course.
  • The amendments also introduce the following measures to safeguard these important concessions:
  • requiring vendors to keep records of full details of the relevant calculations (e.g. the basis of the percentage completion figures provided to the purchaser) and be able to provide them to the SRO upon request. Records are required to be retained by the transferor (vendor) for a period of five years from the date on which the dutiable transaction occurred or the record was made; and
  • imposing joint and several liability on transferors and transferees for any additional duty arising as a result of incorrect information supplied to the SRO as part of a concession claim.

While the changes should reduce the cost and administrative burden on developers in providing the necessary statutory declarations to enable purchasers to claim the concessions, the record keeping requirements and the imposition of joint & several liability will need to be carefully managed by developers.

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