Skip to main content

Surprise amendments to stamp duty for developer agreements - Vic

May 30, 2019

Members will be aware that the Victorian Government handed down its budget on Monday. The budget paper highlighted a revenue shortfall of $5.2 billion and identified some property tax changes to help the government manage the shortfall. These changes were described in a HIA member alert earlier this week.

Unfortunately there is another property tax change which seems not to have been described in the budget papers. This surprise change is expected to have a major financial impact on development agreements and similar transactions where land is developed and/or project managed by a second party (i.e. not the land owner) for subsequent sale to home owners.

The major surprise is the introduction of changes in the State Tax Acts Amendment Bill 2019 that are described in the explanatory memorandum as “addressing the Supreme Court's decision in BPG Caulfield Village Pty Ltd v Commissioner of State Revenue [2016] VSC 172 regarding the “economic entitlement” landholder provisions in order to safeguard the revenue” (our emphasis).

In simple terms the outcome of the legislation is that the practice of using development agreements will be further regulated and exposed to liability for stamp duty.

The Duties Act has existing provisions provide that where a developer obtains an “economic entitlement” to land then a dutiable transaction is taking place. This existing provision has been interpreted by the Supreme Court to require that the entitlement be to all the land, and not just some of the land. The decision also found that any economic entitlement had to be for at least 50% of all the land owned by the land owner.

The Bill proposes to limit the existing “economic entitlement” rules to situations where a second party buys an interest in ownership of the land. A new Part 4B would be inserted into Chapter 2 of the Duties Act to provide that any arrangement to obtain an “economic entitlement” in land worth more than $1 million will trigger a stamp duty liability for the developer.

There are a number of other amendments, including a provision that payments other than economic entitlements, such as reimbursements or fees, may result in duty being assessed on 100% of the value of the relevant land.

The State Taxation Acts Amendment Bill 2019 has been passed by the Legislative Assembly and introduced to the Legislative Council. It is expected the Bill will be debated in the Legislative Council next week.

The exact impact of this legislation will depend on how your transactions are structured. If you have any involvement in the purchase of land by clients you should get legal advice about the possible impact of this proposed legislation.

HIA is urgently seeking feedback and information from members about the impact of the proposed legislation on their business and customers. You may either contact Fiona Nield, Executive Director Victoria at or Keith Ryan, Director Workplace Services & Compliance at or by calling 03 9280 8200.