On 19 February 2009, the Victorian Treasurer announced that
retirement villages would not be caught by proposed stamp duty
changes that will impose duty on the granting, transfer, assignment
and surrender of certain leases. We are yet to see the legislative
amendments that will provide this relief to retirement
In December 2008, we reported on the introduction of the
Duties Amendment Bill 2008 (Bill) by the Victorian
Government and the impact that it could have on retirement village
click here to view our December update).
A media release issued shortly before the Bill was introduced
advised that the Government would introduce changes to "close
a loop hole" that allowed the use of complex long-term lease
arrangements to escape stamp duty liability. The media release has
also referred to these changes as being "anti-avoidance"
measures. Despite this, the proposed changes are not limited to
long-term leases and may have significant implications for all
tenants in Victoria. The changes will have retrospective effect and
are to apply from 21 November 2008.
Once the Bill is enacted, stamp duty will apply to the following
"the granting of a lease for which any consideration
other than the rent reserved is paid or agreed to be
"the transfer or assignment of a lease for which any
consideration is paid or agreed to be paid" (irrespective
of whether any consideration other than the rent reserved was paid
on the initial grant of the lease); and
"the surrender of dutiable property"
(including a lease of a kind referred to in the above dutiable
Following lobbying by industry bodies, including the Retirement
Villages Association, the Government has recognised the
"unique and special requirements of older Victorians" and
agreed to introduce amendments to prevent the unintended
consequences of the Bill applying to retirement homes. Although the
retirement village industry can take some comfort in the knowledge
that their concerns have been acknowledged, it is not clear what
form the exemption will take. It is difficult to know whether
proposed or current transactions will be subject to duty until the
legislative amendments are tabled and passed into law.
If an exemption is not available, duty will be payable on the
greater of the consideration (other than the rent reserved that is
paid or agreed to be paid) and the unencumbered value of the land
that is the subject of the lease.
Although it is not clear whether the phrase "any
consideration other than the rent reserved" will be
construed more widely than just lease premiums, the Commissioner of
State Revenue has released a draft ruling that provides some
guidance regarding the interpretation of this phrase. As this
ruling is currently only in draft form, it may change following
consultation with stakeholders. In its current form, the draft
ruling provides that "outgoings" will generally be
treated as rent reserved that would not (without any further
payments) give rise to a stamp duty liability. However, the draft
ruling provides that the construction of the particular lease will
need to be considered in each case – providing little
comfort in the absence of a private ruling.
Rulings only present the Commissioner's interpretation of
the actual legislation and do not have the force of law.
Accordingly, it would be preferable for the legislation to clarify
the phrase "any consideration other than the rent
reserved" or at least provide guidance as to how it
should be interpreted.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The income tax treatment of any property lease incentive will vary, depending on the nature of the inducement provided.
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