This article is from the Australian Property Journal archive
LEND Lease has lost its appeal against a $20 million stamp duty assessment in the High Court, in a landmark decision which has broader implications on how property developers pay taxes on land transfer deals.
Victoria’s State Revenue Office made a $20 million stamp duty assessment over the sale of seven parcels of land that Lend Lease and VicUrban, now known as Places Victoria, at Docklands. Each contract of sale had a set price referred to as a “Staged Land Payment”.
The land transferred included the ANZ Bank global HQ, Dock 5, Myer, Mosaic, Montage and Convesso sites.
VicUrban transferred the undeveloped land to Lend Lease in stages between 2006 and 2010. Under the deal, Lend Lease was required to make contributions to the infrastructure at Docklands, largely on land that it did not owned or purchased.
As a result, VicUrban and Lend Lease agreed they would share the proceeds from the sale of the land developed by Lend Lease to third parties, the arrangement was referred to as “Contribution Payments”.
Victoria’s SRO Commissioner assessed that stamp duty was payable on the purchase price of each parcel plus the infrastructure contribution payments. As a result, Lend Lease had to pay higher taxes.
Lend Lease objected and lost the case in the Supreme Court of Victoria.
Lend Lease appealed to the Court of Appeal of the Supreme Court of Victoria, and last year it won the case in the Court of Appeal and the Victorian SRO was ordered to repay Lend Lease $2.4 million.
In reversing the Supreme Court’s decision, the Court of Appeal treated the infrastructure contribution payments as separate to the contract land sales.
However, the SRO Commissioner was granted special leave on August 15 this year to appeal to the High Court.
Yesterday Justices French, Hayne, Kiefel, Bell and Keane, found in favour of Victoria’s SRO and dismissed the Court of Appeal’s decision with costs.
Although the High Court retained parts of the Court of Appeal’s decision and ordered the Commissioner to reassess the duty by excluding the amount described as referable to “Grand Plaza Retention Amount”.
The Grand Plaza is a large rectangular area running alongside Etihad Stadium. The works relate to construction of a waterfront promenade, relocating the tramway and associated landscaping.
Under the 2001 development agreement, Lend Lease was required to undertake the construction works in relation to the Grand Plaza at its own expense, of no more than $20 million, without any obligation to make any payment to VicUrban.
However the agreement subsequently changed and under a 2008 development agreement, VicUrban assumed responsibility for the works on the Grand Plaza.
In return, Lend Lease agreed paid a “Grand Plaza Contribution” to VicUrban of $22.8 million, which was collected in instalments.
The High Court’s decision sets a landmark precedent for all property developers across Australia.
In a legal notice published prior to the High Court’s decision, law firm Allens’ Brisbane partner Katrina Parkyn, Sydney tax partner and practise leader Charles Armitage and Melbourne partner Martin Fry, said the decision will be particularly relevant for property developers that contribute to construction and development costs.
They said the decision by High Court would apply more broadly where dutiable property is transferred as part of an integrated project involving the exchange of mutual promises.
Norton Rose Fulbright’s Melbourne partner Andrew Spalding said in a note published last year that this decision will affect developers contemplating a transaction, development or other arrangement that involves payments separate from the agreed consideration for land.
And he said developers who have entered into such an arrangement should consider whether this case can be relied upon when determining the consideration for the transfer of land for stamp duty purposes.
Australian Property Journal
