Duty is calculated on the dutiable value of a property.
Dutiable value includes late settlement interest resulting from:
- a late settlement
- a settlement failing and being rescheduled.
Why is duty paid on late settlement interest?
Late settlement interest is part of the consideration which 'moves' the transfer of the land. This was confirmed by a 2020 decision by the Supreme Court of Victoria.
Therefore, it is a component that forms part of the dutiable value of the land. As such, duty is payable on late settlement interest.
When is duty payable on late settlement interest?
A transaction must be re-lodged for reassessment if:
- the contract of sale or arrangement was entered on or after 1 July 2022, and
- the late settlement interest is $5000 or more.
Transactions that incur additional consideration resulting in late settlement interest of less than $5000 do not need to be re-lodged.
Does late settlement interest form part of the dutiable value for the purposes of duties concessions and exemptions and the First Home Owner Grant?
During the interim period, late settlement interest will not form part of the dutiable value of the land for the purpose of determining eligibility for the:
- principal place of residence concession
- first home buyer duty exemption, concession or reduction
- off-the-plan concession
- pensioner concession
- young farmer exemption or concession
- First Home Owner Grant.
How is duty paid on late settlement interest?
Where late settlement interest is payable, the amounts should not be included in Duties Online.
In these cases, settlement can proceed with the original estimation based on duty calculated without late settlement interest.
The purchaser (transferee) and/or their representative is required notify us by email and re-lodge the transaction for reassessment of duty 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 the transaction that is required to be reassessed is not re-lodged with the SRO within 30 days of settlement, interest and penalties may apply. Any interest and penalty imposed will be borne by the purchaser (transferee).
How is duty calculated on late settlement interest?
Duty is calculated on the dutiable value of the property. This is the price you paid for the property (and includes late settlement interest) or its market value, whichever is greater. Duty is calculated on a sliding scale, starting at 1.4% for properties valued at $25,000, and rising to 6.5% depending on the value of the property and when the agreement or arrangement for the transfer was entered into.
The amount of duty that you are required to pay is the difference between the duty chargeable on the dutiable value of the property (including late settlement interest) and the duty previously paid.
Alice enters into a Contract of Sale of Real Estate for Property A for a purchase price of $1,000,000. Alice is not entitled to any duty concessions or exemptions. Duty of $55,000 is paid via Duties Online based on the purchase price of $1,000,000 prior to settlement.
Due to unforeseen reasons, settlement of Property A was delayed and Alice is required to pay $10,000 in late settlement interest to the vendor. As a result, the total dutiable value of Property A is $1,010,000.
Duty is re-assessed based on the total dutiable value of $1,010,000 for Property A. As a result, duty of $55,550 is chargeable for the transaction. As Alice has already pre-paid duty of $55,000, she is required to pay the difference of $550 in respect of the late settlement interest.