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Developer Stamp Duty Update – Economic Entitlements

There have been significant stamp duty changes in Victoria dealing with “economic entitlements”.

Under the new rules, a person (or company or trust) acquires an economic entitlement where they enters into an arrangement in relation to land with value exceeding $1 million and they are entitled to:

  • share in the income, rents or profits derived from the land;
  • share in the capital growth of the land;
  • share in the proceeds of sale of the land;
  • receive any amount or entitlement determined by reference to the above amounts; or
  • acquire an entitlement to any of the above amounts.

Unlike the previous rules, there is no threshold for the economic entitlement acquired (previously 50%) and the rules can apply to any type of landowner (not just unit trusts and private companies).

Developers must therefore be careful when using property development agreements, as there may be an upfront stamp duty cost when entering into the agreement. Further, property development agreements going forward will need to be drafted carefully to ensure that duty is not chargeable as though the developer has acquired a 100% interest in the relevant land (which it will be deemed to be unless expressly sated otherwise) .

Tip!! Contact us if you are considering any development or similar transactions concerning Victorian land so we can assist you with navigating the “economic entitlement” duty provisions.

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