Fixtures and duty
Learn how fixtures affect the dutiable value of land.
Key information
Duty will apply if you acquire fixtures of significant value separately from the land on which they are located.
The separate fixtures rules explained on this page apply only where parties deal with fixtures independently, such as when a buyer purchases a business without the underlying land, or acquires fixtures with a lease.
For duty purposes, fixtures include:
- something that constitutes a fixture at law, being tangible property attached to land so that it becomes part of the land; and
- any other items fixed to land, including tenant’s fixtures even if they can be removed or moved at a later time.
Transactions where duty may apply
Parties can deal with or hold interests in fixtures separately from the underlying land. For example, a tenant may continue to own fixtures while another party acquires the land. A party may also transfer an interest in the fixtures without any change in ownership of the land.
You often acquire fixtures when you acquire a business. If this involves a transfer of fixtures together with an assignment of a non-dutiable lease, and these fixtures are of significant value, you may pay duty on the acquisition of the fixtures.
If you acquire the business together with the underlying land (i.e. the freehold is transferred to you), you will pay duty on the combined value of the land and fixtures.
The acquisition of a security interest in a fixture is not dutiable.
Amount of duty
Whether you pay duty depends on the total unencumbered value of the fixtures involved in the arrangement, rather than the value of the interest you acquire.
No duty applies if the total unencumbered value of the fixtures is $2 million or less.
Example 1: No duty on fixtures under $2 million
Finn is buying a commercial business from Keira. As part of this arrangement, Keira will transfer the business lease and all the fixtures held by the business to Finn. The lease is a non-dutiable lease. The total unencumbered value of the fixtures is $1.9 million.
As the unencumbered value of the fixtures is $1.9 million, Finn does not pay duty on this arrangement.
If the total unencumbered value of the fixtures is between $2 million and $3 million, duty phases in on a sliding scale.
If the total unencumbered value of the fixtures is over $3 million, full duty at the general rates applies.
Exception
The $2 million threshold and the phasing‑in between $2 million and $3 million do not apply if the arrangement involves a dutiable lease referred to in section 7(1)(b)(v) or section 7(1)(b)(va) of the Duties Act 2000 (the Act) in relation to the underlying land on which the fixtures are located.
Calculating duty payable
For values between $2 million and $3 million, duty is calculated using the following formula:
[(A – $2,000,000) ÷ $1,000,000] × B
where:
- A is the total unencumbered value of the fixtures
- B is the duty that, apart from this section, would be chargeable on the dutiable transaction under Chapter 2 of the Act.
Duty will be closer to $0 the closer the total unencumbered value of the fixtures is to $2 million. As the total unencumbered value approaches $3 million, the duty approaches the full amount that would normally apply.
Example 2: Fractional interest and phasing-in formula
Ava enters into an arrangement to purchase a 20% interest in fixtures (but not the underlying land) owned by Bindi. Ava is not a foreign purchaser.
The total unencumbered value of the fixtures is $2.5 million. The value of the interest in the fixtures acquired by Ava is $500,000 (being $2.5 million × 20%).
As the total unencumbered value of the fixtures is $2.5 million, Ava must pay duty. However, the phasing-in formula applies as the total unencumbered value of the fixtures is between $2 million and $3 million.
Duty is calculated as follows:
Duty = [(A – $2,000,000) ÷ $1,000,000] × B
where:
- A is the total unencumbered value of the fixtures
- B is the duty that would be otherwise chargeable but for applying this formula.
B is calculated by taking the value of the interest in the fixtures acquired by Ava ($500,000) and applying the general rate of duty that applies. The rate of duty on dutiable property valued at more than $130,000 but not more than $960,000 is $2,870 + (6% of the amount that exceeds $130,000).
Therefore, A is $2.5 million and B is $25,070, being $2,870 + [6% × ($500,000 – $130,000)].
Duty = [($2,500,000 – $2,000,000) ÷ $1,000,000] × $25,070
Duty = ($500,000 ÷ $1,000,000) × $25,070
Duty = 50% × $25,070
Duty = $12,535
If the total unencumbered value of the fixtures in the arrangement exceeds $3 million, full duty at the general rates is payable.
Example 3: General rates for fixtures valued above $3 million
Sajida enters into an arrangement to purchase a 100% interest in fixtures (but not the underlying land) owned by Oren. Sajida is not a foreign purchaser. The total unencumbered value of the fixtures is $4 million.
As the total unencumbered value of the fixtures is more than $2 million, Sajida must pay duty. As the value of the fixtures exceeds $3 million, duty is calculated as follows at general rates.
Duty = the value of the fixtures acquired × applicable rate
The rate of duty on dutiable property valued at more than $2 million is $110,000 + (6.5% of the amount that exceeds $2 million)
Duty = $110,000 + [($4 million – $2 million) × 6.5%]
Duty = $110,000 + $130,000
Duty = $240,000
Aggregation
Separate dutiable transactions (including separate fixture transactions) can be aggregated and treated as one dutiable transaction if the transactions together form or give effect to substantially one arrangement. There is no time limit for aggregating fixture transactions.
Example 4: Aggregation of fixtures
Ravi acquires a retail chain operating from four stores across Victoria under separate non-dutiable leases with different landlords. The value of the fixtures at each site is $1.5 million.
If Ravi acquired one shop on its own (assuming no other dutiable property), there would be no duty consequences as the fixtures for that site are valued at less than $2 million. However, as Ravi is acquiring 4 stores, the value of all fixtures acquired under the arrangement is aggregated.
The value of all fixtures acquired under the arrangement is $6 million ($1.5 million × 4).
As the unencumbered value of all the fixtures is more than $3 million, duty at general rates applies. The phasing-in formula does not apply.
Duty is calculated as follows:
Duty = the value of the fixtures acquired × applicable rate
The rate of duty on dutiable property valued at more than $2 million is $110,000 + (6.5% of the amount that exceeds $2 million).
Duty = $110,000 + [($6 million – $2 million) × 6.5%]
Duty = $110,000 + $260,000
Duty = $370,000
Example 5: Aggregation of fixtures transactions
Gamma agrees to buy all the assets of a wind farm. The wind farm is made up of 8 wind turbines located on land leased from a third party. The leases are non-dutiable leases. The agreement provides that the acquisition of each turbine will complete separately on separate days.
Each turbine is considered a fixture. The value of each turbine is $1.5 million, meaning the total value of all fixtures involved in the arrangement is $12 million.
The aggregation rules apply to the acquisition of each turbine. Therefore, the transactions are aggregated and treated as a single dutiable transaction relating to fixtures worth $12 million.
As the unencumbered value of all the fixtures is more than $3 million, duty at general rates applies. The phasing-in formula does not apply.
Duty is calculated as follows:
Duty = the value of the fixtures acquired × applicable rate
The rate of duty on dutiable property valued at more than $2 million is $110,000 + (6.5% of the amount that exceeds $2 million).
Duty = $110,000 + [($12 million – $2 million) × 6.5%]
Duty = $760,000
However, to preserve the benefit of the thresholds, a fixture transaction and another dutiable transaction (not involving the underlying land or a dutiable lease concerning the underlying land) are not aggregated if the fixture transaction relates to fixtures with a value that does not exceed $3 million.
Example 6: Aggregation fixtures and other land transaction
Zhi buys a 50% interest in a Melbourne manufacturing business. The business operates from a leased site under a non-dutiable lease. Its assets are made up of the manufacturing assembly line (tenant’s fixture) valued at $2.5 million and a separate piece of freehold land, used as a car park, valued at $2 million.
As the land and fixtures are being purchased under one arrangement, they are prima facie aggregated and treated as one dutiable transaction. However, because the total unencumbered value of the fixtures is less than $3 million and the land transfer is not for the land on which the fixtures are located, duty is calculated separately as if aggregation did not apply.
Calculating duty – fixtures component
The duty payable for the acquisition of 50% of the fixtures (i.e. the assembly line) will be calculated in accordance with the phasing-in formula given the fixtures are valued between $2 million and $3 million. Accordingly, the duty payable for the fixtures part of the arrangement is $34,375.
This is calculated as follows:
Duty = [(A – $2 million) ÷ $1 million] × B
Where A is the unencumbered value of the fixtures and B is the duty that would be chargeable but for applying this formula.
B is calculated by taking the value of the interest in the fixtures acquired by Zhi ($1,250,000) and applying the general rate of duty that applies. The rate of duty on dutiable property valued at more than $960,000, but not more than $2 million, is 5.5%.
Therefore, A is $2.5 million and B is $68,750 (being $1,250,000 × 5.5%)
Duty = [($2,500,000 – $2,000,000) ÷ $1,000,000] × $68,750
Duty = ($500,000 ÷ $1,000,000) × $68,750
Duty = 50% × $68,750
Duty = $34,375
Calculating duty – Land component
The duty payable for the acquisition of 50% of the land is $55,000.
This is calculated as follows:
Duty = dutiable value of property × applicable rate × 50% interest
The rate of duty on dutiable property valued at more than $960,000, but not more than $2 million, is 5.5%.
Duty = $2 million × 50% × 5.5%
Duty = $55,000
Calculating duty – Total (aggregated) duty
The duty payable is the sum of the 2 calculations and is $89,375 ($34,375 + $55,000).