A public ruling, when issued, is the published view of the Commissioner of State Revenue (the Commissioner) on the particular topic to which it relates. It therefore replaces and overrides any existing private rulings, memoranda, manuals and advice provided by the Commissioner in respect of the issue(s) it addresses.
Where a change in legislation or case law (the law) affects the content of a public ruling, the change in the law overrides the public ruling—that is, the Commissioner will determine the tax liability or eligibility for a concession, grant or exemption, as the case may be, in accordance with the law.
An agreement for the sale of land requires the purchaser to pay the purchase price at settlement in exchange for the vendor giving possession of the property. At settlement, the purchaser does not pay the purchase price even though the vendor is able to settle.
The vendor terminates the contract due to the purchaser’s breach and sues for damages.
The agreement will be exempt from transfer duty under s.115(1)(a) of the Duties Act.
Example 2—Non-fulfillment of a condition
An agreement for the sale of land is subject to the purchaser obtaining finance. The purchaser is unable to obtain finance approval.
The parties decide to terminate the agreement due to the purchaser being unable to obtain finance.
The agreement will be exempt from transfer duty under s.115(1)(b) of the Duties Act.
N operates a manufacturing business producing plastic goods from a factory. M enters into an agreement with N to purchase the business. The business assets consist entirely of machinery and goodwill attributable to the machinery and the factory’s location. Three days later, the factory burns down through no fault of the parties. The machinery is totally destroyed and the business can no longer operate from that location. The agreement did not contemplate loss of the assets, making the performance of the contract impossible.
The agreement is automatically terminated as a consequence of the event.
The agreement will be exempt from transfer duty under s.115(1)(c) of the Duties Act.
P enters into an agreement (the first agreement) with V to purchase V’s property. Before settlement, P wishes to change the purchaser of the property to include his spouse, Q. P and V agree to cancel the first agreement, and another agreement (the second agreement) is entered into between V as vendor and P and Q as purchasers, to replace the first agreement. The terms of the first and second agreements are otherwise identical.
As a result of cancelling the first agreement, P is released from his obligations under that agreement. P acquires an interest in the property with Q under the second agreement.
Because the interest that P acquires in V’s property does not represent a profit for P as a result of the second agreement, the second agreement is not a resale agreement (explained in paragraphs 15–18) and s.115(1)(d) of the Duties Act applies, so transfer duty will not be payable on the first agreement.
P enters into an agreement (the first agreement) with V to purchase V’s property. The first agreement contains a clause that allows P to nominate a third party to be the purchaser of the property, provided the notice requirements are satisfied. P nominates Q as the new purchaser and gives notice to V in the manner required in the first agreement. Q executes a new agreement with V on the same terms (with the exception of the nomination clause).
As the parties acted at all times pursuant to their rights and obligations under the first agreement for the sale of the property, the first agreement has been performed, not cancelled. Transfer duty will be payable on the first and second agreements.10
Example 6—Direct financial benefit
P enters into an agreement (the first agreement) with V to purchase V’s property. Before settlement, P learns that B wishes to purchase V’s property and is willing to pay a fee to P in exchange for P agreeing to terminate the first agreement. B pays such a fee to P, and P and V agree to cancel the first agreement. Another agreement (the second agreement) is then entered into between V as vendor and B as purchaser.
In these circumstances, the second agreement involves the transfer of property that is the subject of the first agreement. P acquired a direct financial benefit as a result of the second agreement, because P has been paid a fee by B for agreeing to terminate the first agreement.
Therefore, the second agreement will be considered to be a resale agreement, so the first agreement will not be considered to be exempt under s.115 of the Duties Act. Transfer duty will be payable on both the first and second agreements.
Example 7—Indirect financial benefit
The same facts as Example 6, except that the fee payable for P terminating the first agreement is paid to P’s family trust.
In these circumstances, the second agreement is a resale agreement under s.115(2) of the Duties Act because P has received an indirect financial benefit due to the payment of P’s fee to P’s family trust.
Therefore, s.115 of the Duties Act will not apply to the first agreement and transfer duty will be payable on both agreements.
Commissioner of State Revenue
Date of issue: 11 March 2021
|Public Ruling||Issued||Dates of effect|
|DA115.1.3||11 March 2021||11 March 2021||Current|
|DA115.1.2||12 November 2018||12 November 2018||10 March 2021|
|DA115.1.1||19 May 2017||19 May 2017||11 November 2018|