Two key changes to the Duties Act 2000 (Vic) (Duties Act) have recently come into effect:
- land development arrangements: the scope of economic entitlements provisions has been expanded so more types of land developments may be subject to duty
- duty concessions: transfers of commercial and industrial land in regional Victoria will be eligible for a duty concession from 1 July 2019.
These amendments to the Duties Act are significant. Property investors and developers should be aware of how these changes are likely to impact their developments and investment activities.
Each of these key amendments are discussed below.
Land development arrangements
The economic entitlement provisions have been significantly overhauled. As a consequence, many types of land development arrangements executed on or from 19 June 2019 may now be subject to duty.
The new provisions are aimed at imposing duty on arrangements where a person, without acquiring an ownership interest in land, obtains the economic benefits in relation to land that are normally reserved for the owner of the land.
These changes do not apply to existing development agreements or other arrangements entered into before 19 June 2019.
In summary, the key changes are:
- provisions now apply to all types of landowners
- no threshold: any economic entitlement will be subject to duty
- 100 per cent interest acquired under an economic entitlement if the agreement:
- does not specify the percentage of the economic entitlement acquired
- specifies that percentage but also includes other amounts payable
- entitles the person or their associate to two or more types of economic entitlements.
Overview of new provisions
The following table is a comparison between the new provisions against the old economic entitlement provisions.
Duty will be payable when the economic entitlement is obtained, having regard to the unencumbered value of the land at the time of entering into the relevant agreement.
If you are in the process of finalising a land development arrangement, please carefully review the new economic entitlements, in consultation with your lawyer, to determine their application to your agreement.
Duty concessions on transfers of commercial and industrial land in regional Victoria
To provide support to regional businesses and encourage businesses to relocate and expand in regional areas, a concession for transfers of commercial or industrial land in regional Victoria was announced in the 2019-2020 State Budget.
From 1 July 2019, contracts, arrangements or agreements to transfer commercial or industrial properties in regional Victoria attract a concessional rate of land transfer duty.
Amount of concession
A 10 per cent duty concession applies from 1 July 2019.
The percentage will increase annually by 10 per cent to provide a full 50 per cent duty concession from 1 July 2023.
The relevant date will be the date that the contract, arrangement or agreement for the eligible transfer was entered into.
Meaning of regional Victoria
To qualify for the concession, the dutiable property must be wholly in regional Victoria.
The term "regional Victoria" in this context has the same meaning as it does for the first home owner grant (section 18(8) of the First Home Owner Grant Act 2000 (Vic)).
That definition can be viewed here and includes the land that falls under 48 rural-based municipal councils as well as the six alpine resorts of Mt Baw Baw, Mt Buller, Mt Hotham, Mt Stirling, Falls Creek and Lake Mountain.
Use of the land
The relevant land must be used solely or primarily for a qualifying commercial, industrial or extractive industry use for a continuous period of at least 12 months, commencing in the two years following the date of transfer.
The classification of commercial or industrial property is determined by reference to the land uses set out in ranges 210 to 299 and 310 to 499 of the Australian Valuation Property Classification Codes.
If you are currently negotiating a transfer of commercial or industrial land in regional Victoria, we recommend that you consider with your lawyer whether the duty concession may apply.
This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.