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One dutiable transaction or many?

20/12/2014

Duties are imposed on transactions, not on the document recording them. The legislation explicitly recites that duty ought be charged on each distinct transaction within a single instrument (for example, Duties Act 2000 (Vic) s.261 and Duties Act 1997 (NSW) s.294). Where some of those transactions are dutiable and others are not, the question arises how the price should be apportioned between them for the purpose of assessing duty.

To make that apportionment more transparent, it’s been common practice since Bambro (No 2) Pty Ltd v Commissioner of Stamp Duties (1963) 63 SR (NSW) 522 to record each separate transaction in an autonomous contract. In that case, the price for the design and construction of a building was not counted towards the dutiable value of the underlying land.

The decision of the High Court in Commissioner of State Revenue v Lend Lease Development Pty Ltd has given further incentive for that approach.

In 2001. VicUrban owned the Victoria Harbour Precinct of the Docklands. It was a polluted, disused industrial wasteland. In 2001, it entered into an agreement with Lendlease. VicUrban agreed to de-contaminate the site, procure external Infrastructure and public artworks, then release title in stages to LendLease. In return, Lendlease made several payments for each stage, some at the time of transfer of title, while other payments were deferred. Those payments were described as a “Minimum External Infrastructure Contribution”, “Minimum Gasworks Site Remediation Contribution” and a “Stage Integrated Public Art Contribution”. Lendlease constructed public infrastructure, residential apartments and commercial offices, which have transformed the precinct into an area in which people live, work and find recreation.

The High Court adopted the test in Commissioner of State Revenue (NSW) v Dick Smith Electronics Holdings Pty Ltd to hold that each transfer was in consideration of the several payments and actions by Lendlease. The transfer was moved by the totality of those obligations which were interlocked with, and indivisible from, one another. A failure to perform any of those stipulations could lead to termination of the arrangement. There was a single bargain, not several.

The Court was not persuaded by the argument that each stage remained unimproved at the time of transfer. It declined to characterise payments as for “sale and transfer of the Land”, for “ongoing development” and for its “ultimate realisation”, because that presupposed the answer to the ultimate statutory question.

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