Duty payable on late settlement interest
How delays and interest charges can increase duty costs.
Key information
Late settlement interest is included in the dutiable value of a property and duty is payable on that amount.
Late settlement interest includes any default or penalty interest payable under a contract and may arise from:
- a late settlement
- a settlement failing and being rescheduled.
Late settlement interest is part of the consideration for the transfer of the land. This was confirmed by a 2020 decision by the Supreme Court of Victoria.
Effect on concessions, exemptions and grants
As an interim measure, late settlement interest is not included in the dutiable value of the land when determining eligibility for the following concessions, exemptions and grants:
- principal place of residence concession
- first home buyer duty exemption or concession
- off-the-plan concession
- pensioner concession
- young farmer exemption or concession
- First Home Owner Grant.
Reassessment requirements and process
You must email us to request a reassessment if:
- the contract of sale or arrangement was entered on or after 1 July 2022, and
- the late settlement interest is $5,000 or more.
When we receive a request, we reassess duty using the updated dutiable value, regardless of whether duty is paid before or after settlement.
Where late settlement interest is payable, do not include the amounts in Duties Online.
Settlement can proceed with the original duty estimate calculated without late settlement interest. Do not cancel the transaction or create a new transaction in Duties Online.
The purchaser (transferee) and/or their representative must notify us by email to request a reassessment within 30 days of settlement. You must provide:
- your contact details (including address for service)
- the bundle/transaction ID of the original lodgement
- the dutiable value declared as part of the original lodgement
- the amount of the late settlement interest or any other additional consideration paid for the transfer not declared as part of the original lodgement.
If you do not notify us within 30 days of settlement, interest and penalties may apply. The purchaser (transferee) must pay any interest and penalty imposed.
Calculating additional duty
When late settlement interest is included, we reassess duty using the updated dutiable value of the property.
Example 1
Alice enters into a contract of sale for a property with a purchase price of $1,000,000. Alice is not entitled to any duty concessions or exemptions.
Before settlement, duty of $55,000 is paid via Duties Online based on the purchase price of $1,000,000.
Settlement is delayed, and Alice pays $10,000 in late settlement interest to the vendor. The late settlement interest increases the total dutiable value of the property to $1,010,000.
Duty is re-assessed based on the total dutiable value of $1,010,000. The re-assessed duty for the transaction is $55,550. As Alice has already paid duty of $55,000, she needs to pay the difference of $550.