Transfer duty concession for homes and first homes—residential purposes
A practice direction, 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 practice direction, the change in the law overrides the practice direction—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.
What this direction is about
- This practice direction clarifies the Commissioner’s practice regarding land used for ‘residential purposes’ in relation to the transfer duty concessions available to homes.
- Chapter 2, Part 9 of the Duties Act 2001 (Duties Act) provides concessions for transfer duty on certain dutiable transactions, including the following (each a relevant transaction):
- the transfer, or agreement for the transfer, of a home, first home other than a new home, first and new home, or vacant land on which a first home is to be constructed
- the acquisition—on its creation, grant or issue—of a new right that is a lease
- of residential land on which a home, first home other than a new home, or first and new home, is constructed or of vacant land on which a first home is to be constructed
and - for which a premium, fine or other consideration is payable
- of residential land on which a home, first home other than a new home, or first and new home, is constructed or of vacant land on which a first home is to be constructed
- the vesting—under s.9(1)(d) of the Duties Act—of a home, first home other than a new home, first and new home, or of vacant land on which a first home is to be constructed.1
- In relation to a relevant transaction involving the acquisition of residential land, or interest in residential land, a residence is a person’s home if the person’s occupation date2 for the residence is within 1 year after the person’s transfer date3 for the residential land.4
- In relation to a relevant transaction involving the acquisition of vacant land—or interest in vacant land—on which a first home is to be constructed, a residence that is to be constructed on vacant land5 is a person’s first home if, among other things, the person’s occupation date for the residence is within 2 years after the person’s transfer date for the vacant land.6
- Section 87 of the Duties Act defines a residence as a building, or part of a building, that is all the following:
- fixed to land
- designed, or approved by a local government, for human habitation by a single family unit
- used for residential purposes.
- Section 86A of the Duties Act defines residential land to be land, or part of the land, on which a residence is constructed, and includes the curtilage attributable to the residence if the curtilage is used for residential purposes.
Direction and explanation
- To be eligible for a concession in relation to a relevant transaction involving the acquisition of residential land, the residence and the surrounding land (curtilage) needs to be used for residential purposes. Where part of the residence or surrounding land is not used for residential purposes, a concession will not be allowed in respect of that area.
- This imposes a positive obligation on the transferees or the lessees that the building and surrounding land is actually used for a purpose based on or connected with the home. That is, the residence must be ‘lived in’ and the land surrounding the residence must be used for normal home living.
- If part of the residence or surrounding land is not used for residential purposes (e.g. if a business, or other income producing activity, is being conducted on the property) then only the proportion of the land that is used for residential purposes will attract the concession.
Example 1
Amon purchases property consisting of a general store and a home. The general store is worth $100,000 and the home is worth $200,000.
Amon will only be entitled to the concession on $200,000.
Example 2
Beth purchases land and premises with an area of 15,000m2. The residence and a fenced yard comprise 6,000m2 of the property. The other 9,000m2 contains an area for small-crop farming and sheds for business use.
The property is valued at $250,000. The house and the 6,000m2 of land is valued at $180,000 and the other 9,000m2 (containing the area for farming and sheds) is valued at $70,000.
Beth will only be entitled to the concession on $180,000.
Example 3
Cailan purchases a property with an area of 10,000m2. The house, gardens, garden sheds, swimming pool and tennis court occupies 2,500m2. The other 7,500m2 is vacant land used by the family for keeping their horses.
The property is valued at $350,000. The house and the 2,500m2 of land is valued at $200,000 and the other 7,500m2 of vacant land is valued at $150,000.
Because the curtilage is used as part of the ordinary enjoyment of the land for residential purposes, Cailan will be entitled to the concession on $350,000.
- Whether or not an area of the residence used as a home office will be considered as being used for residential purposes will depend on the nature of the use. This is a question of fact that must be determined with regard to the individual circumstances of each case.
- Where the nature of the use indicates that the particular area has the character of a place of business the concession will not be allowed in respect of that area.
- The following factors may be relevant in determining whether or not an area has the character of a place of business:
- the area is clearly identifiable as a place of business
- the area is not readily suitable or adaptable for use for private or domestic purposes in association with the home generally
- the area is used exclusively or almost exclusively for carrying on a business
- the area is used regularly for visits by clients or customers.
Example 4
Dominic acquires a 3-bedroom home for $300,000. They run a business from the home and will use one of the rooms for this purpose. A valuer has valued the room at $40,000.
Dominic will only be entitled to the concession on $260,000.
This can be contrasted with the circumstance where the transferee will maintain an office or study as a matter of convenience (i.e. so they can carry out work at home that would otherwise be done at their regular place of business or employment). In this case the home office will attract the concession.
Example 5
Eduardo purchases a 4-bedroom home for $320,000.
Because he works from home 3 days per week, one of the bedrooms will be used as a home office; however, no business is being conducted on the property.
Eduardo will be entitled to the concession on $320,000.
Date of effect
- This practice direction takes effect from 1 May 2025.
Simon McKee
Commissioner of State Revenue
Date of issue: 1 May 2025
References
| Practice direction | Issued | Dates of effect | |
|---|---|---|---|
| From | To | ||
| DA087.1.1 | 1 May 2025 | 1 May 2025 | Current |
| Supersedes Public Ruling DA087.1.4 | 3 July 2012 | 1 July 2012 | 30 April 2025 |
Footnotes
- Section 85 of the Duties Act
- Sections 88 and 95A(2) of the Duties Act
- Defined in s.89 of the Duties Act
- Section 86(1) of the Duties Act
- Defined in s.86C of the Duties Act
- Section 86B of the Duties Act