Assumed tax liabilities: What counts as consideration for land transfer duty?

The State Revenue Office of Victoria (SRO) has released Revenue Ruling DA-070 to address when assumed tax liabilities form part of the consideration for a transfer of land. The ruling takes effect from 17 August 2026.

Key principle

While the consideration often simply equals the purchase price, in many transactions the purchaser also takes on additional costs or liabilities. It’s not uncommon for contracts to include clauses requiring the buyer to pay a portion of the vendor’s outstanding taxes related to the property.

DA-070 outlines that ‘consideration’ is not limited to the sale price as stated in a contract of sale and that payments by the purchaser towards a tax liability for which the vendor is liable for in respect of the land (Assumed Tax Liability Amount) can form part of the consideration for a transfer of land.

Importantly, DA-070 clarifies that the characterisation of Assumed Tax Liability Amount as consideration will hinge on its substance as opposed to its form. Further, the SRO also notes that labels and payment directions, such as ‘to the vendor directly’ or ‘to a third party’, will not determine the characterisation. Consistent with case law, DA-070 outlines that an Assumed Tax Liability Amount forms part of the consideration for a transfer of land if, assessed at the time of transfer and viewing the transactions as a whole, is part of what moves the transfer.

DA-070 zeros in on specific taxes: land tax, windfall gains tax (WGT), the congestion levy, and rates.

Land tax

DA-070 highlights Section 10G of the Sale of Land Act (1962) (SLA), which prohibits vendors from passing on land tax to purchasers for properties sold where the sale price of the land is less than the ‘threshold amount’. Relevantly, the threshold amount from 1 January 2026 is $10.7m. Therefore, any such purported assumption of land tax would not be able to move a transfer of land and, therefore, cannot form part of the consideration.

However, where the sale price is at or above the threshold amount, then it’s legal for a contract to require the purchaser to pay some of the vendor’s land tax. In those cases, DA-070 states that such a payment will be part of the dutiable consideration, provided it’s truly part of the deal.

Windfall gains tax

Section 10H of the SLA prevents vendors from passing on an existing WGT liability to purchasers at the time of contract, in the same way that section 10G applies to land tax. Accordingly, if a WGT liability has already been assessed when the contract is signed, the vendor cannot make the purchaser pay it, therefore, an existing WGT liability cannot be included as consideration for the transfer of land.

Where no WGT liability exists when a contract of sale is made, it may be included in the contract that if a liability should arise before settlement, the purchaser will assume some or all of the vendor’s WGT liability. In those circumstances, the amount will form part of what moves the transfer of land if it is provided in addition to the sale price, such that the vendor would not transfer the land without that payment. As such, it will be considered part of the consideration.

Congestion Levy

The congestion levy is imposed each year on owners of a car park on leviable parking spaces within the levy area, with owners being solely liable or jointly and severally liable depending on the type of car park.

Under a contract of sale for a car park, the purchaser can agree to cover some or all of the vendor’s congestion levy liability by paying an additional amount. DA-070 provides that if this payment is made on top of the sale price and is essential for the vendor to proceed with the transfer, it is treated as part of the consideration for the land.

Rates

When settlement occurs, rates for the current rating period are usually adjusted so the purchaser reimburses the vendor for any rates paid covering the post-settlement period. This reflects the vendor’s pre-payment for a time when the purchaser will own the property. Under DA-070, the Commissioner will not treat these adjustments as consideration for the transfer of land.

How SW can help

Taxpayers should pay close attention to sale contracts as any assumed tax liabilities could potentially result in a larger duty liability arising.

Our State Taxes team can assist with guiding you through the complexities of land transfer duty and tax liability assumptions, ensuring your transactions complies with the latest SRO rulings.

Contributors

Blake Trad | Senior Consultant, Tax