In every dutiable transaction the question arises: what is the dutiable value of the transaction? In the latest decision on this issue by the High Court, the Court has applied the law in finding that Lend Lease was required to pay duty not only on the consideration payable by it on a transfer of land, but also the amounts payable by Lend Lease under various “development agreements” entered into at the same time.
In this Alert, Special Counsel Justin Byrne discusses the High Court’s decision.
The main points arising out of the Lend Lease decision are as follows:
- The facts in the case are complex, however, in broad terms Lend Lease agreed to purchase land from VicUrban as well as essentially pay for certain infrastructure and other related works to be done on the land;
- The Commissioner of State Revenue (Victoria) assessed duty on the combined value of the land purchase as well as other payments required to be made for the infrastructure works etc.;
- Broadly, the Commissioner applied a “but for” test. That is, “but for” the requirement to make payments for the infrastructure and other works, there would not have otherwise been a conveyance of the land, and as such, the true consideration that “moved” the transfer of the land was a combined value of both the land and the payments for the infrastructure works;
- Matters involving the dutiable value of a transaction can, and often are, finely balanced and as evidence of that, the Commissioner succeeded at first instance in the Supreme Court of Victoria, whereas the Court of Appeal found in favour of Lend Lease. The Commissioner then appealed to the High Court; and
- In finding for the Commissioner, the High Court focussed on what the true consideration was that “moved” the transfers of the land to Lend Lease. In so doing, the High Court implicitly endorsed the “but for” test adopted by the Commissioner.
In our view, the decision of the High Court is a direct application of the law. In each and every transaction a thorough consideration of the circumstances surrounding the transaction needs to be undertaken to ascertain whether or not the totality of the arrangements have been considered and whether or not this has any bearing on the dutiable value. There is always the possibility that the dutiable value of the transaction exceeds the “obvious” consideration to be provided by one party to another under the one transaction. It may be, for example, that a payment of a dividend prior to completion forms part of the dutiable value of a transfer of shares (as was the case in the Dick Smith decision). Further, there may be instances where contingent consideration is payable, in which case, such contingent amounts can also form part of the dutiable value of the transaction.