For contracts of sale or arrangements entered into on and from 1 July 2022, the State Revenue Office will now impose duty on penalty interest paid by a purchaser due to a late or delayed settlement.
This new duty is the result of a recent Victorian Supreme Court decision when it was held that penalty interest is part of the overall consideration paid by the purchaser to “move” the transfer of the land and therefore is dutiable.
For a period of 12 months only, the duty will only be payable if the amount of the penalty interest is $5,000 or more. It is not yet clear whether this threshold will remain after 12 months.
This new duty highlights the importance to purchasers of settling their contracts of sale on time.