Real property can be purchased for many reasons including the purchase of a family home as a principal place of residence, and it can also be purchased as an investment. Where the property purchased for occupation, with no intention of future development prior to settlement, at this time the assessment of stamp duty is made on the contract price/ market value of the property and is paid at settlement by the purchaser. Where property is purchased as an investment, there are often other issues that need to be considered, and by far preferably before a contract is signed to avoid the substantial potential penalty of Double stamp duty being incurred by the purchaser.
The assessment of stamp duty under the Duties Act 2000 ( Vic) can impose double duty in some circumstances where a purchaser seeks to nominate an additional or alternate purchaser to acquire the property, after the Contract to purchase the property has been signed and before settlement is effected. It is common for a purchaser who intends to develop a property to purchase in one person or entities name and seek to then nominate an alternate entity, often only having been set up after the signing of contracts. The risk of double stamp duty arises where the purchaser developer (nominated purchaser) either pays additional funds to the original purchaser, or the original purchaser has undertaken or participated in “ land development” after signing the Contract, but before the nomination has been made.
Land development can include any of the following:
Applying for a planning or building permit;
Preparing or seeking registration of a plan of subdivision;
Requesting an amendment to a planning scheme;
Doing any building works that require a permit;
Developing or changing the land in any way that will enhance its value.
It is strongly recommended that where you are seeking to purchase real property with any intention for land development that you seek legal advice before Contracts are signed to ensure that the correct structures and documents are in place to minimise your risk of assessment of double stamp duty.