Victorian stamp duty changes: game changer for property developers

New stamp duty changes have been passed in Victoria.

The changes are a game changer for property developers and continue the alarming trend to broaden the stamp duty base. A developer has already reportedly said it will walk away from a 900-lot house-and-land project in Melbourne’s west in the wake of the changes.

There are also changes that will impact stamp duty on restructures of corporate groups. The changes to the corporate reconstruction exemption take effect from 1 July 2019, so any planning must occur before then.

Property development arrangements

Development arrangements where a land owner owns the land while a third party develops the land is subject to duty if the ‘economic entitlement’ provisions apply. Under these arrangements, the developer collects a fee when the developed parcels of land are sold.

The position before and after the amendments is:


The following characteristics would trigger stamp duty:

  • The land owner is a private company or a private unit trust (i.e., it did not apply to land owners that are natural persons or discretionary (family) trusts);
  • The developer (or related person) acquires shares (or units) in the landholder, or, more typically for development arrangements, enters into an arrangement with the owner under which the developer (or related person) is entitled to dividends, income (including rent), capital growth or proceeds of sale from the project, or a fee calculated by reference to any of these amounts (referred to as an “economic entitlement“); and
  • The proportion of dividends, income, capital growth or proceeds of sale must represent an interest of 20% or more if the landholder is a unit trust, or 50% or more if the landholder is a company.


Under the changes:

  • Arrangements which include the acquisition of an economic entitlement from any type of land owner, not just companies and unit trusts, are captured;
  • The percentage thresholds are removed so that the acquisition of any economic entitlement will trigger stamp duty; and
  • Where the arrangement does not explicitly specify the percentage economic entitlement acquired by the person, or is vague having reference to other amounts the person (or their associate) is entitled to, the legislation deems an acquisition of 100% to have occurred unless the Commissioner of State Revenue determines otherwise.

This change will have a significant impact on the property development industry and significantly increase the upfront costs of certain arrangements. As with sweeping changes of this nature, there will be unintended consequences that will need to be managed and the State Revenue Office has released guidelines.

Importantly the duty exposure arises when an ‘entitlement’ or interest to share in dividends, income, capital growth or proceeds of sale crystallises, which in most instances will be before the land is sold and the development fee is paid.

Developers, and any other development participant (including funders) or providers of services to land owners who acquire a right to a commission, fee or other amount referenced to proceeds from the land, should seek legal advice before entering into or varying any such arrangement.

Corporate reconstruction exemptions

Broadly, transfers of dutiable property between members of a corporate group or as a consequence of the income tax consolidation of a group is eligible for a 100% stamp duty exemption.

A prescribed condition to the exemption is that the members of the group have to remain members for three years after the transaction date (except because of a public float or liquidation/deregistration/wind up).  The Commissioner of State Revenue may also impose other conditions in granting the exemption, which are binding on each member of the corporate group.

From 1 July 2019, such transfers will give rise to a 90% concession as opposed to a 100% exemption – meaning an effective stamp duty amount of up to 0.55% of the value of the property is payable (or 1.35% for foreign entities).

On a favourable note, the post-association restriction  which required members to remain members of the same group for three years will be scrapped and the Commissioner’s power to impose additional conditions has been removed.

Importantly, if you are eligible for this exemption as part of a restructure of dutiable property within a corporate group, you should consider whether to put this in place prior to 1 July 2019 to save the 10% of duty.