The taxpayer was nominated as the substitute purchaser of a property in Plumpton under a contract of sale of land (Original Contract), which was subsequently varied by two Deeds of Variation. In addition to the stated purchase price, the taxpayer was obliged to pay amounts of interest on moneys owing under the contract up to the date of settlement (referred to as Default Interest and Loan Advance Interest).
In September 2018, the Commissioner issued a reassessment of additional duty on the transfer of land on the basis of the stated consideration, the sum of the ‘loan advance interest’ and the ‘default interest’ payments deciding those payments formed part of the consideration for the transfer of the property and were therefore dutiable under s 20(1)(a) of the Duties Act 2000.
On 1 April 2020, the Tribunal decided in favour of the Commissioner as to the Loan Advance Interest, but not the Default Interest. The Commissioner appealed and the taxpayer cross appealed the decision to the Supreme Court of Victoria.
On 9 December 2020, Kennedy J decided in favour of the Commissioner on appeal from the Tribunal. The Court held the Tribunal had correctly concluded that the ‘loan advance interest’ payments formed part of the consideration which moved the transfer of the property because the vendors were not prepared to transfer the property in the absence of receipt of the loan advances before the settlement. The Court also held the Tribunal should have held that the ‘default interest’ payments also formed part of the consideration which moved the transfer of the property because in the absence of those payments the vendors would have terminated the contract.