A recent decision of the High Court allows the State Revenue to levy duty on payments made to a vendor of land for building services supplied after completion of the land sale contract (Commissioner of State Revenue (Vic) v Lend Lease Development Pty Ltd [2014] HCA 51). The duty base therefore included both the purchase price for the land and the additional payments for services.

The vendor and purchaser entered into a development agreement. The development agreement obliged the parties to enter into certain land sale contracts. Each land sale contract provided that certain defaults under the development agreement would entitle the vendor to terminate the land sale contract. Failure to comply with a provision of the development agreement, a land sale contract or any other project document was an event of default.

The development agreement also required the purchaser to pay certain amounts referable to building work to be carried out at a later date.

The High Court considered that the payment for the building works was subject to duty so that duty was payable on these amounts as well as the stated land price. This was because the several promises of payment in the development agreement amounted to consideration that moved the transfer of the land. The vendor was willing to transfer the land only in consideration of the purchaser making all the payments agreed in the development agreement. The interlocking nature of the obligations was demonstrated by reference to the provisions made by the development agreement in respect of default. The transaction was "single, integrated and indivisible".

The High Court's decision significantly widens the reach of the duty net to allow the State Revenue to capture within the duty net payments made to a vendor for services, in addition to the price paid for the land. This applies even if that price by itself equals the market value of the land. Careful examination is required of the relationship between a land sale contract and other agreements which form part of a development project, where there is provision for separate payments to the vendor for services. This will be required to ascertain whether the duty base extends to additional payments for services, even if on the face of the contract and in an economic sense, those payments are for something other than the land.