In addition to the existing evidentiary requirements, Revenue NSW now require a valuation of the land if the option is exercised more than 12 months from the date of the option.

Traditionally, where a contract has been entered into between unrelated parties, pursuant to an option agreement, Revenue NSW has imposed duty on the consideration under the option (i.e. the exercise price). However, in light of this new practice, Revenue NSW may seek to impose duty on the higher of the consideration and the current market land value.

This new practice may result in:

• more duty being payable than the amount that has been priced into the transaction; and
• delays to settlement due to:
  • the requirement to obtain a valuation; and
  • Revenue NSW requiring approximately 28 days to assess the transaction documents from the time of lodgement. Transactions involving options must be lodged for Commissioner assessment; they cannot be self-assessed via EDR.

In our view, it is questionable whether the use of the current land value as a measure of the dutiable value of land subject to an option is correct at law.

Practically, transferees who are assessed based on the current land value (which exceeds the consideration) have the right to formally object to the duties assessment under Part 10 of the Taxation Administration Act 1996 (NSW). They may then commence proceedings if the objection is disallowed.

Please contact a member of our team if you have any questions, or would like further advice regarding this matter.