Commissioner of State Revenue v Lend Lease Development Pty Ltd
The High Court has ruled in favour of the Victorian state revenue office (SRO) in a stamp duty dispute with property developer Lend Lease. The dispute relates to an agreement by Lend Lease to buy a number of parcels of land in Melbourne’s Docklands area from the former Victorian state development agency, VicUrban, for commercial and residential development.
Under the development agreement, Lend Lease agreed to pay:
- a stated amount for the purchase of the land, plus
- a number of additional amounts which related to development of the precinct - but did not directly relate to improvements to land that would ultimately be transferred to Lend Lease by the authority, including:
- an infrastructure contribution (for the construction of various forms of infrastructure on and around the land, including a road extension, bridge and park)
- a remediation contribution (to pay for the remediation of some industrial land, including land neighbouring the site acquired by Lend Lease)
- a public art contribution (to fund the acquisition of art works to be installed in public places), and
- a share of the proceeds from the ultimate sale of the developed land by Lend Lease.
The SRO assessed duty on the acquisition of land based on the aggregate of all the amounts payable under the development agreement.
On objection, and on appeal, Lend Lease argued that the remediation contribution, the public art contribution and the profit share were not payments for the transfer of the land but rather, related to matters that were separate and distinct from the transfer of the land, and in this sense should not form part of the consideration for the transfer of land, and therefore should not be subject to duty.
The High Court has now confirmed that the transaction recorded in the development agreement was a single, integrated and indivisible transaction and that all of the amounts payable under the development agreement constituted ‘consideration’ for the transfer of the land. As such, the SRO was correct in assessing duty on the entire amount (including GST) payable by Lend Lease to the authority in respect of the project.
In all Australian jurisdictions, transfer duty is calculated based on the higher of the consideration paid for the transfer of dutiable property, or the unencumbered market value of that property. This case was focused on determining what consideration was paid for the transfer of the land to Lend Lease. The High Court, citing its earlier decision inCommissioner of State Revenue (NSW) v Dick Smith Electronics Holdings Pty Ltd, reinforced that ‘the statutory criterion of consideration ‘for’ the transaction looks to what was received by the Vendors so as to move the transfers to the Purchaser as stipulated in the Agreement’.
In the present case, the High Court ruled that the consideration that moved VicUrban to transfer the land to Lend Lease comprised the totality of the amounts payable in respect of the promises recorded in the development agreement, which included the promise to pay the remediation contribution, the public art contribution and the profit share.
This decision is somewhat complicated by the fact that the vendor was a government owned entity and the expenditure conditions on the infrastructure and artwork were included in the agreement that provided for the sale of the land. The decision in this case has potential to produce anomalous results when applied to different fact scenarios. Consider, for example, if the vendor was a private party and the infrastructure expenditure and development conditions in respect of the land and surrounding land were imposed by a government agency via a development approval process. Arguably, based on the Lend Lease decision, compliance with the development approval conditions in that scenario should not form part of the consideration that moved the vendor to sell the property. That said, it would also be an unusual outcome if the duty liability on a land transfer depended on the identity of the vendor.
Although it would be tempting to try to restrict this decision to its facts, this case demonstrates the High Court’s continued application of a very broad interpretation of what constitutes ‘consideration’ for duty purposes generally.
In practice this will impact on duty assessments on a wide range of commercial dealings and the relevant revenue offices are likely to become more aggressive in their assessment of duty on payments that may on first glance not appear to form part of the purchase price. In some jurisdictions, a purchaser may be able to achieve certainty of the duty outcome by obtaining a private ruling before proceeding, but in other states (such as Queensland) such a ruling will generally not be available. Given the potential magnitude of the additional duty liability (it was approximately $2.5 million additional duty in the Lend Lease case) purchasers, and particularly property developers, should seek specific duty advice to ensure that the appropriate amount of duty is budgeted for, and also to ensure every legitimate step is taken to minimise the duty payable.