From 1 July 2022, the State Revenue Office advised that if settlement is delayed and penalty interest paid by the purchaser, the penalty interest also known as late settlement interest will form part of the dutiable value of the land. This followed a 2020 decision by the Supreme Court of Victoria (The Commissioner of State Revenue V 1043 Melton Highway Pty Ltd) where the Court found that late settlement interest is part of the consideration which moves the transfer, and as such duty is payable on the interest.
In light of this decision made by the Supreme Court, any contract of sale that is entered into after 1st July 2022 where late settlement interest paid is for $5,000 or more, must be lodged for re-assessment by the State Revenue Office within 30 days of settlement taking place. After the re-assessment has occurred, the State Revenue Office will issue an invoice for the extra stamp duty payable to the purchaser.
If the transaction that is required to be reassessed is not lodged for reassessment within 30 days of settlement, penalties may apply. Any transactions that incurs late settlement interest of less than $5000 does not need to be reassessed by the State Revenue Office.
It is important to note that late settlement interest will not form part of the dutiable value for determining eligibility for the following:
• Principle Place of Residence Concession
• First Home buyer duty exemption or concession
• Off the plan concession
• Pensioner concession
• Young farmer exemption or concession
• First home buyers grant
If you have any further questions on late settlement interest or any other questions in relation to conveyancing please contact our Casa Conveyancing team.
