Settlement Adjustments in Victorian Conveyancing

What an adjustment is — and is not

An adjustment is a contractual calculation that changes the balance payable between vendor and purchaser to reflect a periodic outgoing or income item spanning the contractual adjustment date. It does not change the purchase price, and it does not create a liability that the contract or the general law does not already impose.

Adjustments are distinct from other settlement movements. A payment direction or disbursement — a mortgage payout, a payment required to clear a specified liability, or duty paid to the State Revenue Office — is a movement of funds rather than a rebalancing between the parties. A retention holds part of the price against a defined contingency. A withholding under the GST at settlement or foreign resident capital gains rules is a federal statutory payment to the Commissioner of Taxation. The deposit is the purchaser's existing contribution to the price. A fee — the electronic workspace fee, registration fees, agent's commission — is a cost of settling. Liabilities that cannot be quantified in time are dealt with under the contract's post-settlement adjustment clause, not by reopening the transaction as of right.

How to read a statement of adjustments

Most disputes about a statement are resolved by reading it in a fixed order. Work through these seven questions:

1. Debit or credit? A debit to the purchaser increases the balance payable; a credit to the purchaser reduces it. Every line should be identifiable as one or the other, and the direction should make sense against who has actually borne the cost.
2. Paid or unpaid? If the vendor has already paid an outgoing covering a period after settlement, the purchaser reimburses the post-settlement portion. If the outgoing is unpaid and will fall on the purchaser, the vendor allows the pre-settlement portion. Getting this backwards is the single most common error.
3. What is the adjustment period? Rates run on the council financial year, water service charges on a billing quarter, owners corporation fees on the owners corporation's financial year. Each item is apportioned over its own period and its own actual day count, leap years included.
4. Who bears the settlement day? There is no universal Victorian rule. The contract allocates the day, and the party-day counts must add up to the total days in the period.
5. Arrears, interest and penalties. Arrears are not simply apportioned; they are a pre-settlement liability that generally needs to be paid or expressly allowed for, together with any interest or recovery costs disclosed.
6. Rent paid in advance. Rent received by the vendor for a period after settlement is credited to the purchaser. Rent in arrears is dealt with under the contract rather than assumed.
7. Bonds and security deposits are not adjustments. A residential bond is transferred through the statutory process; a commercial security deposit or bank guarantee is dealt with under the lease. Neither belongs in the apportionment columns.

Finally, keep the distinction between changing the balance payable and changing the purchase price. The price is fixed by the contract; adjustments move money at settlement without altering it. That matters for duty, for lender funding and for any calculation that is expressed by reference to the price.

Source documents behind the figures

Each line should be traceable to a document, not to a previous file:

• Council land information certificate — issued under s 229 of the Local Government Act 1989 (Vic), showing rates, waste charges, the Emergency Services and Volunteers Fund levy and any recoverable works amounts;
• Water information statement and special meter reading — from the retail water corporation, showing service charges and usage to settlement date;
• Owners corporation certificate under s 151 of the Owners Corporations Act 2006 (Vic) — disclosing current fees, arrears, special fees, insurance and other prescribed information as at the certificate date;
• Property clearance certificate for land tax under s 105 of the Land Tax Act 2005 (Vic) — issued by the State Revenue Office;
• Lease and rent ledger — for tenanted property, with bond and outgoings recovery records; and
• The contract and Section 32 statement — which determine what is adjustable, on what basis and subject to what exclusions.

These certificates are essential source documents, but they are not the last word. Each speaks as at its issue date. Before the workspace locks, reconcile them against later payments, current invoices and notices, supplementary valuations, revised assessments, newly struck special fees and any change to the settlement date. An old certificate carried into a rescheduled settlement is a predictable source of error.

Council rates, ESVF and water

Council rates are apportioned on a daily-rate basis over the council financial year using the land information certificate. The Emergency Services and Volunteers Fund (ESVF) levy replaced the Fire Services Property Levy from 1 July 2025 and is collected through council rates, so a current certificate shows an ESVF amount. Where a statement describes a period before 1 July 2025 the former name remains correct; for any current settlement it does not.

Water service and sewerage charges are apportioned over the billing period shown on the water information statement. Metered usage is calculated to settlement day from a special meter reading arranged with the retail water corporation, rather than estimated. Whether each item is treated as paid or unpaid, and which party bears the settlement day, is dictated by the contract and reflected in the statement.

Owners corporation amounts

Ordinary annual fees are usually apportioned on a daily-rate basis over the owners corporation's financial year by reference to the s 151 certificate. Beyond that, there is no single allocation rule, and the following should be separated rather than merged:

• Ordinary annual fees — periodic and ordinarily apportionable;
• Special fees already struck — whether the whole amount, or only instalments falling due after settlement, is the purchaser's concern depends on the contract, the resolution and the due dates. The resolution date alone is not decisive;
• Instalments and due dates — an instalment that has fallen due and is unpaid is arrears, not a future obligation;
• Arrears, interest and recovery costs — pre-settlement liabilities that should be paid or expressly allowed for; and
• What the certificate and contract say — the certificate discloses the position as at its date; the contract governs allocation.

This matters because unpaid owners corporation money can remain recoverable in respect of the lot, so a purchaser who takes an arrears figure on trust may find the consequences follow the lot after settlement. Refresh the certificate if it is old or if further resolutions have been passed since it issued.

Land tax — statutory limits on adjustment

For a contract of sale of land entered into on or after 1 January 2024, s 10G of the Sale of Land Act 1962 (Vic) makes ineffective a term requiring the purchaser to pay an amount for or towards land tax for which the vendor is or may become liable, where the sale price is below the indexed threshold in s 10I. The rule is framed by sale price rather than by land use, so it applies to commercial and industrial land below the threshold in the same way. The threshold is $10.7 million from 1 January 2026 and is subject to future indexation, so the current figure should be confirmed with the State Revenue Office rather than treated as permanent.

Two things need to be kept apart. A prohibited contractual adjustment is a term making the purchaser pay or reimburse the vendor's land tax; a contract cannot validate it, because the statute makes the term ineffective. Payment or discharge of the vendor's own land tax so that a clear property clearance certificate is available at settlement is a different thing entirely — that is the vendor meeting its own liability to obtain clear title, and it is not prohibited.

At or above the threshold, contractual assumption or apportionment may be permissible and is governed by the contract. Where a purchaser assumes a vendor liability, that may form part of the consideration for duty purposes; see our guide to land transfer duty.

Windfall gains tax

For contracts of sale and option agreements entered into on or after 1 January 2024, the Sale of Land Act 1962 (Vic) prohibits a vendor from passing on to the purchaser a windfall gains tax liability under the Windfall Gains Tax Act 2021 (Vic) that is known at the time the contract or option is entered — assessed, with notice served on the vendor, before that time. A clause requiring the purchaser to pay a known liability is void and its inclusion is an offence.

Where an assessment issues after the contract is entered, the position differs: drafting may allocate payment between the parties, but the vendor remains the assessed taxpayer and the charge on land and clearance-certificate consequences still require attention on completion. In practice an anticipated cost is commonly reflected in the sale price rather than sought by reimbursement. The prohibition is separate from the vendor's disclosure obligations under s 32.

Commercial and industrial property — land tax and CIPT

For commercial and industrial land the s 10G land tax rule applies in the same way: below the threshold the vendor cannot require the purchaser to pay or reimburse the vendor's land tax.

The Commercial and Industrial Property Tax (CIPT) is a separate reform. It progressively replaces land transfer duty and landholder duty for qualifying commercial and industrial property once the land has entered the reform through an entry transaction on or after 1 July 2024, with CIPT becoming payable ten years after entry. It does not replace ordinary annual land tax, which continues to apply on its own terms. Current State Revenue Office guidance also restricts apportioning or passing CIPT to a purchaser under a contract entered on or after 1 July 2024 below the indexed threshold. Any CIPT dealing at settlement should begin by confirming that the land has actually entered the reform and checking the current thresholds and certificate requirements with the SRO.

Tenanted property, rent and bonds

Rent paid in advance is apportioned so that the purchaser is credited with rent attributable to the post-settlement period; rent in arrears is dealt with under the contract and may be assigned or accounted for separately. For a residential tenancy, the bond held by the Residential Tenancies Bond Authority is transferred under the statutory process in the Residential Tenancies Act 1997 (Vic) rather than adjusted. For a retail lease under the Retail Leases Act 2003 (Vic), or a non-retail commercial lease, security deposits and bank guarantees transfer according to the lease terms. Outgoings recovery under a commercial lease needs its own reconciliation between what has been recovered from the tenant to settlement and what the landlord has paid or owes for the same period.

GST at settlement and foreign resident withholding

Two federal obligations sit alongside the adjustment calculation without being adjustments. Both arise under the Taxation Administration Act 1953 (Cth) and both are payments to the Commissioner of Taxation.

GST at settlement applies to certain supplies of new residential premises and potential residential land. The vendor must give the prescribed written notice, and where the regime applies the purchaser must pay the notified amount to the ATO on or before the day consideration for the supply other than the deposit is first provided. Settlement will ordinarily be that day, but not invariably — an instalment contract, or consideration provided earlier, can bring the obligation forward.

Foreign resident capital gains withholding applies to acquisitions of taxable Australian real property. For contracts entered into from 1 January 2025 the rate is 15% and the former value threshold has been removed. An Australian-resident vendor ordinarily needs to give the purchaser a valid ATO clearance certificate before settlement so that no withholding is required. The statutory amount is calculated by reference to the first element of the purchaser's cost base for the asset — commonly, but not invariably, the contract price — and the ATO may issue a variation reducing the amount. Late clearance certificates are a common cause of delay and should be requested well before the settlement window.

Deposit, stakeholder release and balance payable

The statement typically starts with the contract price, deducts the deposit already paid, then applies the net adjustments to reach the balance payable at settlement. The deposit is the purchaser's existing contribution to the price, not an adjustment. Early release of the deposit before settlement is not automatic: it requires an application under s 27 of the Sale of Land Act 1962 (Vic) with the prescribed particulars, service on the purchaser and the statutory objection period. The stakeholder releases the deposit at settlement, or earlier only where a valid s 27 process has been completed.

A worked example

Illustrative only — the contract controls the adjustment date, the allocation of the settlement day and any special treatment of an item. Do not use these figures for an actual transaction.

Assumptions:

• Settlement date: 15 October 2026.
• The contract allocates the settlement day to the purchaser, and adopts actual days.
• Purchase price $980,000.00; deposit paid $98,000.00.
• Council rates and ESVF levy: year 1 July 2026 – 30 June 2027 (365 days), rates $2,920.00 and ESVF $365.00, total $3,285.00. Paid in full by the vendor.
• Water service and sewerage charges: quarter 1 October – 31 December 2026 (92 days), $138.00. Unpaid; the account will issue to the purchaser.
• Water usage to the special meter reading at 14 October 2026: $86.40, unpaid, wholly referable to the vendor's occupation.
• Owners corporation ordinary annual fees: year 1 January – 31 December 2026 (365 days), $3,650.00. Paid in full by the vendor. No special fee has been struck.
• Land tax is not adjusted: the price is below the s 10I threshold, so s 10G applies.

Day counts. For the rates year, the vendor holds 1 July to 14 October 2026 inclusive = 31 + 31 + 30 + 14 = 106 days; the purchaser holds 365 − 106 = 259 days. For the water quarter, the vendor holds 1–14 October = 14 days and the purchaser 92 − 14 = 78 days. For the owners corporation year, the purchaser holds 15 October to 31 December 2026 = 17 + 30 + 31 = 78 days.

Note how the two paid items are debited to the purchaser (reimbursing the vendor for the post-settlement portion) while the two unpaid items are credited to the purchaser (allowing for the vendor's pre-settlement portion). The net adjustment changes the balance payable only; the price remains $980,000.00.

How settlement is completed electronically

An Electronic Lodgment Network Operator such as PEXA hosts the workspace, coordinates the financial settlement schedule and interfaces with Land Use Victoria and the State Revenue Office. The parties' representatives, not the platform, calculate and agree the adjustments.

It is a common misconception that every adjusted item is separately paid to the council, water corporation, owners corporation, SRO and vendor out of the workspace. Most adjustments are simply accounting entries that change the balance payable between the parties; the relevant authority is then paid in the ordinary course by whichever party holds the account. Actual disbursements are made from the workspace where they are required — to discharge a mortgage, to clear a specified liability so that clear title passes, to pay duty, or to meet a statutory withholding. What is disbursed and what is merely adjusted depends on the contract, the certificates and the parties' instructions.

After financial settlement, the transfer and any mortgage are lodged with Land Use Victoria for later registration; lodgment and registration are distinct steps. Victorian transfer duty is assessed and administered by the SRO and paid by the purchaser as part of settlement funding — it is not adjusted between the parties. Our PEXA and electronic conveyancing guide covers the workspace process in detail.

Errors, shortfalls, delayed certificates and correction

Before workspace lock, representatives issue an amended statement and refresh certificates. If the purchaser cannot fund the balance, or a bank shortfall emerges, settlement may be delayed and default interest may run under the contract. After settlement, the ability to reopen figures is fact-specific: the contract's post-settlement adjustment clause, the doctrine of merger, mistake and the representatives' professional duties all bear on the question. The platform does not reverse a completed settlement. Raise any material error promptly with the other side and, where warranted, with a lawyer.

Vendor and purchaser checklists

Purchaser:

• Order the s 229 council land information certificate, s 151 owners corporation certificate, s 105 property clearance certificate and water information statement in good time, and refresh anything near or past its currency window before the workspace locks;
• Arrange a special water meter reading close to settlement day;
• Check the contract for the adjustment date, the day-count convention, the allocation of the settlement day, any special conditions on outgoings or levies, and any post-settlement adjustment clause;
• Confirm whether GST at settlement applies by reference to any vendor notice, and whether a foreign resident capital gains withholding obligation arises in the absence of a valid ATO clearance certificate;
• Reconcile the draft statement against every source document line by line, and confirm final funds with the lender ahead of workspace lock.

Vendor:

• Provide up-to-date rates notices (showing the ESVF levy), water accounts, owners corporation statements, land tax notices, and for tenanted property the lease, rent ledger, bond records and outgoings recovery statements;
• Obtain the SRO property clearance certificate and, where relevant, a windfall gains tax certificate;
• Where you are an Australian resident, obtain an ATO clearance certificate well before settlement so that no foreign resident capital gains withholding is required;
• Review the draft statement, arrears and any special fees against your own records, and raise queries early rather than at workspace lock;
• Ensure your lender's payout figure is current and covers accrued interest and fees to settlement day.

When to obtain legal advice

Adjustments are one of the more error-prone parts of a conveyance. Legal advice is particularly useful where the transaction involves an owners corporation, a tenancy, commercial or industrial land, off-the-plan settlement, a disputed special fee, unresolved arrears, a land tax position near the s 10I threshold, a known or contingent windfall gains tax liability, a CIPT-affected property, a possible foreign resident vendor, or a GST-affected supply. We do not promise guaranteed savings or outcomes, and we claim no special access to councils, the SRO, the ATO or banks. For scoped assistance in Victoria our Conveyancing & Property team can be reached on 134 134 during business hours, or via the enquiry form below.

Authoritative sources

• Local Government Act 1989 (Vic) — s 229 land information certificate.
• Sale of Land Act 1962 (Vic) — ss 10G and 10I (land tax), windfall gains tax prohibition, s 27 deposit release, s 32 disclosure.
• Owners Corporations Act 2006 (Vic) — s 151 owners corporation certificate.
• Land Tax Act 2005 (Vic) — s 105 clearance certificate.
• SRO — Notes to property clearance certificates (land tax).
• SRO — Land tax — including the prohibition on apportioning land tax and the current indexed threshold.
• SRO — Buying and selling land subject to windfall gains tax.
• SRO — Commercial and Industrial Property Tax.
• SRO — Emergency Services and Volunteers Fund.
• ATO — GST at settlement.
• ATO — Foreign resident capital gains withholding.
• Land Use Victoria — About electronic lodgment.

Frequently asked questions