Is your duty assessment more than you expected?

Experienced property players know that the Office of State Revenue (OSR) assesses transfer duty on the acquisition of land in Western Australia based on the dutiable value of the property acquired.

Generally speaking, the dutiable value of a property is the higher of the consideration for the purchase, or the unencumbered value of the property. 

What some of you may not know is in cases where at the date of the transaction:

  • there is no consideration for the transaction; or
  • the consideration cannot be ascertained,

the duty will be assessed on the unencumbered value of the property (s 27(b) Duties Act 2008 (WA)).

For contracts for the purchase of a property which express the purchase price as a formula, where a component payable post settlement is a percentage of revenue generated from the future development of the property, the consideration is deemed to be unascertainable at the time of the transaction.

The fact that the purchase price will be known for certain on completion of the development at some time in the future will not have a bearing on the amount or timing of the assessment.  The assessment will be based on the unencumbered value of the property at the time liability to pay duty arose. 

The transaction will be referred to the Valuer General’s Office for a determination of the unencumbered value of the property.  Following which the OSR will make an assessment of the duty payable.

What avenues are open to a tax payer if the unencumbered value of the property (and therefore the duty assessment) is higher than, in the taxpayer’s view, it should be?

The validity or correctness of a valuation made under the Valuation of Land Act 1978 (WA) may only be challenged in proceedings under Part IV of the Valuation of Land Act and not by making an objection under the Taxation Administration Act 2003 (WA) (s 32 of the Taxation Administration Act).

Any person liable to pay duty assessed in respect of land who is dissatisfied with the valuation may make a written objection to the valuation upon the OSR or the Valuer General’s Office (s 32 of the Valuation of Land Act).

The objection must:

  • be lodged within 60 days after the issue of the assessment from OSR;
  • be in writing; and
  • set out the grounds for the objection to the valuation.

The lodgement of an objection to the valuation does not have an impact on the liability to pay the assessment.  If the assessment is due, the tax payer must pay the assessment.  The OSR will refund any over payment if the assessment is revised down as following a reconsideration of the valuation.

An independent valuation of the property may be submitted with the objection in support of any assumptions or grounds for objection raised.

Following receipt of the revised revaluation, the OSR will be able to reassess the duty assessment accordingly.