Victorian State Revenue Office Draft Ruling
07 January 2026
When assumed tax liability can increase dutiable value for land transfers
What you need to know
- The State Revenue Office (Victoria) has released a Draft Ruling clarifying when a purchaser's agreement to cover a vendor's tax liabilities connected with land (eg, land tax, windfall gains tax or congestion levy), forms part of the "consideration" for land transfer duty purposes under section 20(1) of the Duties Act 2000 (Vic) (Draft Ruling).
- Once finalised, the Draft Ruling is proposed to take effect on 1 February 2026
Background
The Law – Land transfer duty
On a transfer of land in Victoria, duty is chargeable on the "dutiable value" of the property, being the greater of:
- the consideration (monetary or non-monetary) for the dutiable transaction; and
- the unencumbered value of the dutiable property.
The term "consideration" is not defined in the Act.
The Draft Ruling
Where a contract of sale requires the purchaser to pay to a vendor an amount for or towards a tax liability (on top of the purchase price) for which the vendor is liable in respect of the land (an Assumed Tax Liability Amount) the Draft Ruling provides that:
"an Assumed Tax Liability Amount forms part of the consideration for a transfer of land."
The characterisation turns on substance, not form: labels (eg "adjustments") and the direction of payment (eg, to the vendor or a third party) do not determine whether an amount is consideration.
What does this mean?
If a purchaser agrees to cover an Assumed Tax Liability Amount, this assumption will:
- form part of the "consideration" for land transfer duty purposes (ie, the dutiable value of the property); and
- ultimately increase the land transfer duty payable in relation to the transaction.
In practice, the question is whether the vendor would transfer the property without the purchaser-funded amount. If not, that amount will generally be treated as consideration, regardless of labelling or the payee.
Additional matters for consideration
Land tax (below threshold)
In accordance with section 10G of the Sale of Land Act 1962 (Vic), a clause passing on land tax to the purchaser is of no effect where the sale price is below the "threshold amount" (ie $10 million for the 2024 calendar year). Such amounts cannot “move” the transfer and are not treated as consideration.
Windfall gains tax (WGT)
A clause requiring the purchaser to assume an existing WGT liability is of no effect and is not treated as consideration.
If WGT arises after the date of contract but before settlement, any purchaser-funded payment in addition to the purchase price, without which the vendor would not transfer the land, will be treated as consideration – whether paid to the vendor or directly to the Commissioner.
Congestion levy
Purchaser-funded payments towards the vendor's levy liability in addition to the purchase price, without which the vendor would not transfer the land, will be treated as consideration.
Rates
Routine forward‑period rates adjustments (ie reimbursing prepaid rates for the post‑settlement period) are not treated as consideration.
However, payments to the vendor for earlier‑period rates (arrears) will be treated as consideration.
Timing and reliance
When finalised, the Draft Ruling will take effect on 1 February 2026. The land tax view applies only to contracts entered into on or after that date; while the positions on other taxes and rates reflect the SRO’s existing approach.
Recommended steps
- Diligence and pricing: Identify Assumed Tax Liability Amounts early and model transfer duty on the true consideration, including any purchaser-funded amounts the vendor requires to settle, except where the Sale of Land Act renders the assumption clause ineffective (ie sub-threshold land tax and pre-existing WGT).
- Contract drafting: For contracts at or above the threshold-amount and for pre-existing WGT, assume any purchaser Assumed Tax Liability Amounts paid in addition to price may be dutiable and draft settlement mechanics accordingly.
Please feel free to reach out to our tax experts Elke Bremner and Steve Whittington if you have any queries in relation to the Draft Ruling and how this will impact your future transactions.
Other authors: Ciara Bellis, Paralegal
