In Victoria, stamp duty applies on most transactions involving land.
One exception is when a purchaser nominates an additional or substitute purchaser to take his/her place under a Contract of Sale prior to settlement, provided the nomination does not involve extra consideration being paid (as opposed to an on-sale), amongst other things.
This arrangement has been in place for many years and was typically used between related parties. A common scenario is where Mr X signs a Contract of Sale then prior to settlement, nominates his wife Mrs X, as a co-purchaser or a family trust as a substitute purchaser.
It is important to note that if the State Revenue Office’s conditions of the exemption for nomination are not met, stamp duty will apply on both transactions – i.e. a transfer between the vendor to the first purchaser and stamp duty between the first purchaser and the nominee.
Due to a combination of credit becoming less available, restricted economic conditions, foreign purchaser restrictions and changes to off the plan stamp duty concession rules, nominations have been increasingly used between unrelated third parties in recent times.
A second hand purchaser may prefer to take a nomination instead of buying it direct from the Vendor to utilise off the plan stamp duty concession for Contracts dated prior to 1 July 2017. Similarly, a purchaser may prefer to nominate to a third party as he/she is unwilling or unable to obtain finance to complete the sale due to change of circumstances. Again, these transactions will be considered on-sales for stamp duty purposes if there is any extra consideration involved.
The standard form of Contract of Sale used in Victoria, is not equipped to handle nomination transactions adequately. The only provisions that are contained in the Contract dealing with nominations are:
In addition, it is not uncommon for an off the plan Contract to contain special conditions that deal with whether nominations can be made to foreign purchasers and the form in which it will be accepted by the Vendor.
It does not address important questions like:
As you can see, this is not just a simple process and great care should be taken before entering into these arrangements. Each situation is different, so it’s worth seeking professional advice beforehand.
Over the last 20 years I have facilitated a number of nominations between unrelated third parties, but always only with the advice and guidance of independent, reliable and experienced property lawyers. The outcome has always been successful, while protecting my clients’ rights.
Get the latest news and insights from The Hopkins Group, as it happens.