Tuesday, January 27, 2015

What constitutes dutiable value of a transaction?

With thanks to team member Hayden Dunnett, today’s post looks at the High Court decision in Commissioner of State Revenue v Lend Lease Development Pty [2014] HCA 51. The decision As usual, a full copy of the decision is available via the following link http://www.austlii.edu.au/au/cases/cth/HCA/2014/51.html.
In most jurisdictions, when a dutiable transaction such as a transfer of land occurs, duty is charged on the greater of the consideration or the unencumbered value of the land.
The Lend Lease transaction involved a complex multistage development between Lend Lease and the Victorian Urban Development Company (“Vic Urban”). Part of the development agreement included Lend Lease purchasing seven parcels or land, and in addition, making four payments for various infrastructure and service costs relating to the parcels of land.
The Commissioner argued the dutiable value of the transfer of each parcel of land to Lend Lease included the additional payments. Lend Lease on the other hand thought the consideration stipulated in the contract of sale for each transfer of the land was the dutiable proper amount.
The Court found in favour of the Commissioner, determining that what was received by Vic Urban was stipulated in the development agreement as a ‘single, integrated and indivisible’ transaction rather than in separate contracts of sale. Duty was therefore payable on the additional payments made by Lend Lease.
The decision confirms that there may be situations where the dutiable value of the transaction may be greater than the payment made for the asset itself.
Where a transfer is one part of a wider transaction, the transaction in its entirety should be considered to determine if any collateral agreements need to be included in determining the dutiable value of the transaction.
Until next week.

Image credit: Nicki Mannix cc