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Duty is to be paid on certain grants, transfers, assignments and surrenders of leases of land.

The Duties Act 2000 (the Act) was amended with effect from 21 November 2008 to ensure that certain leasing arrangements over land in Victoria are not used as a mechanism to avoid duty. The amendments are contained in Chapter 2 of the Act and apply to arrangements by which a lease is used to effectively transfer rights in the underlying land and/or the economic benefits of the land.

Under such leasing arrangements, the rights and benefits obtained by the lessee are viewed as being equivalent to the rights and benefits obtained by a person who acquires the land directly through a sale and purchase transaction.

The lessee acquires rights and benefits over the land equivalent to ownership. The consideration paid, or agreed to be paid, is for the acquisition of these valuable rights, while in contrast, the rent payable under the lease is often minimal.

Application of the lease provisions

The provisions apply to leasing arrangements entered into on or after 21 November 2008 where consideration was paid or agreed to be paid in respect of the arrangement and/or the acquisition of certain rights or interests pertaining to the underlying land.

More about lease provisions

What is a lease?

A lease is defined in the Act as a lease of land, or an agreement for a lease of land, in Victoria. It includes a sublease and concurrent lease but not a licence or right to occupy land that does not contain a grant of the right to exclusive possession.

More about leases


Consideration refers to all things that a party would receive in order to move a transaction. It therefore includes all monetary and non-monetary consideration provided in respect of an arrangement.

More about consideration

What is rent reserved?

Rent reserved means the rent paid or payable during the term of the lease as well as amounts paid or payable for the right to use the land under the lease.

More about rent reserved

Exemptions and concessions

The Act sets out various exemptions, concessions and exclusions from the application of the lease provisions.

More about exemptions and concessions

Calculating duty

Duty is calculated at the land transfer duty rates with reference to the greater of:

  • The consideration, other than rent reserved, that is paid or agreed to be paid in respect of the grant, transfer or assignment of the relevant lease.
  • The unencumbered value of the land that is the subject of the lease.

 Calculate your duty

Lodging and paying duty

Duty is payable within 30 days of a dutiable transaction occurring. A dutiable transaction involving a lease occurs upon its grant, transfer, assignment or surrender. If duty is not paid within this time, a tax default occurs and penalty tax and interest may apply.

The lodgement of transaction documents within the 30-day time period does not remove the requirement to pay duty or prevent a tax default.

Where a dutiable lease transaction includes a right or option to acquire the underlying land, the transaction occurs at the time of grant, transfer or assignment irrespective of whether the right or option to acquire the underlying land has been exercised at that time.

However, where additional consideration equivalent to the full unencumbered value of the land is required to be paid upon or following the exercise of the right or option, the Commissioner generally only requires a taxpayer to pay the duty liability if and when the right or option to acquire the land has been exercised.

In such circumstances, it is considered that the lessee has not acquired valuable rights in the land equivalent to ownership and will only do so upon the exercise of the right or option and payment of the land's full purchase price.

In all other cases where additional consideration less than the full unencumbered value of the land is payable on the exercise of the right or option, duty is payable within 30 days of the grant, transfer or assignment of the lease.

For more information, refer to ss. 7(1)(b)(v), 7(1)(b)(va), 11 and 16 of the Duties Act 2000.

How to lodge and pay duty

More information

To assist you in understanding your obligations under the Act, we have examples illustrating the application of the lease provisions to common situations.

Examples of lease provisions

These examples are provided as a guide only and are not an exhaustive list of the matters or factors we may consider in determining the application of the lease provisions. If you are uncertain about the application of the provisions to your particular circumstances and require clarification, you can request a private ruling.

More about private rulings

Getting it right

Our priority is to help you pay the right amount of tax at the right time. Learn more about how we do this.

Last modified: 5 June 2024

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