The lease provisions apply to the grant of a lease entered into on or after 21 November 2008 for which consideration other than rent reserved is paid or agreed to be paid, either in respect of the lease or the acquisition of certain rights or interests pertaining to the underlying land.
The provisions also apply to the transfer or assignment on or after 21 November 2008 of a lease entered into before or after that date if consideration is paid or agreed to be paid either for the transfer or assignment or the acquisition of certain rights or interests pertaining to the underlying land.
Such rights include a right to purchase the land or a right to a transfer of the land, an option to purchase the land or an option for a transfer of the land, a right of first refusal in respect of the sale or transfer of the land or any other lease, contract, scheme or arrangement by which the transferee or assignee, or associated person, obtains any right or interest in the land that is the subject of the lease other than the leasehold estate.
Similarly, the surrender on or after 21 November 2008 of a lease entered into before or after that date and for which consideration was paid or agreed to be paid is dutiable. However, no duty is payable on the surrender after 21 November 2008 of a lease for which no consideration was paid for its grant, transfer or assignment.
The lease provisions apply broadly and potentially include the grant, transfer, assignment or surrender of a lease for which consideration is paid in respect of any Victorian land whether used for residential or commercial purposes.
Residential leases include, for example, leases of caravan park sites and caravans, leases of alpine apartments and resorts, leases of apartments in golf resorts and eco resorts where these types of arrangements do not constitute land use entitlements.
All leases of commercial property would fall within the lease provisions where consideration is paid or agreed to be paid for the grant, transfer or assignment of the lease or for a right or option to acquire the underlying land.
For example, duty would be payable in respect of the transfer or assignment of a lease of commercial property in consideration of the payment of a premium and an annual peppercorn rental.
However, the grant of a lease under the Retail Leases Act 2003 (RLA) would generally not be dutiable because the RLA prohibits the payment of “key money”, being money payable by a tenant by way of a premium in consideration of, for example, a lease being granted, an agreement to grant a lease, an option for the renewal of a lease or consent being given to the assignment of a lease or to the sub-leasing of premises.
Arrangements that circumvent this prohibition may result in such leases being dutiable under the lease provisions. Where consideration is paid for the transfer or assignment of a lease under the RLA, duty may be payable.
For more information, please refer to ss. 7(1)(b)(v) and (va) of the Act and Revenue Ruling DA.052.