Property Settlement and Adjustment at Settlement in Victoria

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 that spans the contractual adjustment date. Which party bears the settlement day itself is a matter of contract; there is no universal Victorian convention that must be applied.

Adjustments are distinct from other settlement movements: a payment direction or disbursement (for example, a payout to the vendor's mortgagee, a rates payout to council, or duty to the SRO) 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 (GST withholding, foreign resident capital gains withholding) is a federal statutory payment to the Australian Taxation Office; the deposit is the purchaser's existing contribution to the price; and a fee (PEXA transaction fee, LSV registration fees, agent's commission) is a cost of settling, not an adjustment. Post-settlement liabilities that could not be quantified in time are dealt with under the contract's post-settlement adjustment clause, not by reopening the transaction as of right.

Source documents that drive the figures

The reliability of the statement depends on the authoritative source documents behind each line:

• Council land information certificate — typically issued under s 158 of the Local Government Act 1989 (Vic), showing rates, waste and fire services property levy charges, and any recoverable works amounts;
• Water information statement and special meter reading — from the retail water corporation (for example, Yarra Valley Water, Greater Western Water, South East Water, or the relevant regional 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, resolved special levies, insurance and other prescribed information as at the certificate date;
• Land tax clearance certificate under s 105 of the Land Tax Act 2005 (Vic) — issued by the SRO showing land tax liability against the land;
• Lease and rent ledger — where the property is sold subject to a tenancy, together 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.

Council rates, water and the fire services property levy

Council rates and the fire services property levy are usually apportioned on the daily-rate basis over the council financial year, using the s 158 certificate. Water service and sewerage charges are apportioned in the same way; metered usage is calculated to settlement day from a special meter reading arranged with the retail water corporation. Whether an item is treated as adjusted paid or unpaid, and which party bears the settlement day itself, is dictated by the contract and reflected in the settlement statement, not by any external system. PEXA transmits the funds movements agreed in the workspace; it does not validate the underlying calculation.

Land tax — statutory limits on adjustment

For any 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 whether the land is residential, commercial or industrial — below the threshold, an adjustment or reimbursement of the vendor's land tax is not effective regardless of the land's use. As at 23 July 2026 current SRO guidance states the threshold is $10.7 million from 1 January 2026; because it is indexed under s 10I, the current figure should be verified with the SRO on the review date rather than relied on from secondary sources.

At or above the threshold, contractual assumption or apportionment of land tax may be permissible and is governed by the contract; where a purchaser assumes a vendor liability, this may form part of the consideration for duty purposes and should be treated accordingly. It is no longer accurate to describe land tax as routinely adjusted in Victorian sales, or to treat the s 10G rule as confined to residential land.

Windfall gains tax — known liability prohibition

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 — that is, a liability that has been assessed and notice served on the vendor before contract or option. A clause requiring the purchaser to pay a known WGT liability is void, and its inclusion in the contract is an offence.

The prohibition does not operate in the same way where a WGT assessment issues after the contract is entered. Contractual drafting may then allocate payment as between vendor and purchaser, but the vendor remains the assessed taxpayer to the SRO and the charge on land and clearance-certificate consequences still require attention on completion. For pre-2024 options later exercised, the current SRO position on the operative date should be checked. In practice, an anticipated WGT cost is often reflected in the sale price rather than sought by direct reimbursement, so that no known liability is passed on in breach of the Act. The prohibition is distinct from the vendor's separate disclosure obligations under s 32 in respect of a WGT liability.

Commercial and industrial land — land tax and CIPT

For commercial and industrial land the s 10G land tax rule applies in the same way: below the indexed threshold the vendor cannot require the purchaser to pay or reimburse the vendor's land tax; at or above the threshold, apportionment is a matter of contract with duty consequences. The land's use does not disapply the rule.

The Commercial and Industrial Property Tax Reform Act 2024 (Vic) introduced the Commercial and Industrial Property Tax, which becomes payable on eligible commercial and industrial land ten years after the first entry transaction on or after 1 July 2024. CIPT is a separate tax charged in addition to any ordinary land tax on the same land, not a replacement. Current SRO clearance-certificate guidance states that a vendor is prohibited from apportioning or passing CIPT to a purchaser under a contract of sale entered into on or after 1 July 2024 where the purchase price is below the indexed threshold; only where the price is at or above that threshold can contract drafting govern apportionment. Any CIPT dealing at settlement should first confirm that the land has actually entered the reform, verify the current threshold and clearance requirements with the SRO, and ensure that what the contract permits aligns with the statutory position.

Owners corporation amounts

Ordinary annual fees are typically apportioned on the daily-rate basis by reference to the s 151 certificate. Special levies, arrears, interest on unpaid fees and recovery costs are separate items whose allocation depends on when the levy was struck, when it became due, what the contract says, what the certificate discloses and what the parties negotiate. It is not correct to say that the owner on title at settlement automatically bears every levy; treat each amount on the certificate as its own line item with its own basis of allocation. The s 151 certificate is authoritative as at its date and should be refreshed if it is old or if further resolutions have been passed.

Rental property, tenant outgoings and bond

Where the property is sold subject to a tenancy, 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 not an ordinary vendor/ purchaser adjustment — it is transferred under the statutory process in the Residential Tenancies Act 1997 (Vic), and the incoming rental provider must complete the required notices and lodgments. For a retail lease governed by the Retail Leases Act 2003 (Vic), or a non-retail commercial lease, security deposits and bank guarantees transfer according to the lease terms and any applicable statute. Outgoings recovery under a commercial lease requires a separate reconciliation between what has been recovered from the tenant to settlement and what has been paid or is payable by the landlord for the same period.

Federal withholdings — GST and FRCGW

Two federal statutory obligations sit alongside the adjustment calculation but are not themselves adjustments. Both arise under the Taxation Administration Act 1953 (Cth), and both are payment obligations to the Commissioner of Taxation, not rebalancings between vendor and purchaser.

GST withholding at settlement applies to certain supplies of new residential premises and potential residential land. The vendor must give the prescribed written notice; the purchaser (or their representative) is then required to withhold the specified amount from the price and remit it to the Australian Taxation Office on or before the day consideration for the supply (other than the deposit) is first provided. It does not apply to every sale, and it is not a periodic adjustment.

Foreign resident capital gains withholding applies to acquisitions of taxable Australian real property from a foreign resident vendor. Since 1 January 2025 the withholding rate is 15% and the previous property-value threshold has been removed, so every vendor of Australian real property must be treated as a foreign resident unless an ATO clearance certificate is produced by settlement. Where a certificate is produced, no withholding is required; a variation notice can reduce the rate in appropriate cases. Late or absent clearance certificates are a common cause of settlement delay and should be requested well before the settlement window.

Deposit, stakeholder release and balance payable

The settlement statement typically starts with the contract price, deducts the deposit already paid, then applies each adjustment as a credit or debit to arrive at the balance payable at settlement. The deposit is the purchaser's existing contribution to the price; it is not an adjustment. Early release of the deposit to the vendor before settlement is not automatic — it requires an application under s 27 of the Sale of Land Act 1962 (Vic) meeting the prescribed particulars, served on the purchaser and subject to the statutory objection period. The stakeholder (typically the vendor's estate agent or the vendor's lawyer as trustee) releases the deposit at settlement, or earlier only if a valid s 27 process has been completed.

Transfer duty is not an adjustment

Victorian transfer duty is assessed and administered by the SRO through Duties Online. It is paid by the purchaser as part of the settlement funding, not rebalanced between the parties. Duty, concessions, foreign purchaser additional duty and any absentee owner surcharge sit outside the vendor/purchaser adjustment. The land transfer is lodged with Land Services Victoria (the current registry name) through PEXA following financial settlement; lodgment and later registration are distinct steps.

How settlement is completed electronically

PEXA is an Electronic Lodgment Network Operator — a platform that hosts the electronic workspace, coordinates the financial settlement schedule and interfaces with Land Services Victoria and the SRO. The parties' representatives, not PEXA, calculate and agree the adjustments and populate the schedule. On settlement day, source funds are contributed by the purchaser and their lender, disbursements are made simultaneously to mortgagee, council, water corporation, owners corporation, SRO and the vendor, and the transfer and mortgage instruments are lodged for later registration. PEXA is not the registry, not the duty assessor, and not an independent audit of the adjustment figures.

A worked, illustrative example

The following is illustrative only; do not use these figures for any actual transaction. Assume a residential settlement on 15 October 2026, a contract adjustment date of 15 October 2026, and a contract using the actual annual day-count. Assume council rates for the year 1 July 2026 to 30 June 2027 of $2,920.00 (daily rate $2,920.00 / 365 = $8.00) and that the vendor has paid the first instalment only. The daily rate multiplied by the number of vendor days and the number of purchaser days in the rates year produces the vendor's and purchaser's respective liabilities; the unpaid balance is deducted from the vendor's proceeds and paid to council at settlement, and any pre-payment for the post-settlement period is credited to the vendor. The same daily-rate method is applied to owners corporation fees using the OC's financial year, and to water service charges using the billing period on the water statement, with metered usage calculated to settlement day from the special meter reading. In a leap year, 366 days is used where the contract adopts the actual-day convention.

Errors, shortfalls, delayed certificates and post-settlement 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, unjust enrichment and the parties' representatives' professional duties all bear on the question. PEXA does not itself reverse a completed settlement. Any material error should be raised promptly with the other side and, where warranted, with a lawyer.

Vendor and purchaser checklists

Purchaser:

• Order the s 158 council certificate, s 151 OC certificate, s 105 land tax clearance certificate and water information statement in good time, and refresh anything near or past its usual 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, any special conditions on outgoings or levies, and any post-settlement adjustment clause;
• Confirm whether GST withholding is required by reference to any vendor notice, and treat the vendor as foreign for FRCGW purposes unless an ATO clearance certificate is produced by settlement;
• Reconcile the draft statement against every source document line-by-line before signing off, and confirm final funds with the lender ahead of workspace lock.

Vendor:

• Provide up-to-date rates notices, water accounts, OC statements, land tax notices, and (for tenanted property) the lease, rent ledger, bond records and any outgoings recovery statements;
• Obtain the SRO land tax clearance certificate and, where relevant, the WGT clearance certificate;
• Obtain an ATO clearance certificate for FRCGW well before settlement to avoid a 15% withholding on the price;
• Review the draft statement, arrears and levies against your own records, and raise queries early rather than at the workspace-lock stage;
• Ensure the payout figure from your lender is current and covers any accrued interest and fees to settlement day.

When to obtain legal advice

Adjustments are one of the most error-prone parts of a conveyance. Legal advice is particularly useful where the transaction involves an owners corporation, a tenancy, a commercial or industrial property, off-the-plan settlement (see our off-the-plan guide), a disputed special levy, an unresolved arrears question, a land tax position near or above the s 10I indexed threshold, a known or contingent WGT liability, a CIPT-affected property, a foreign resident vendor, or any GST-affected supply of new residential premises or potential residential land. We do not promise guaranteed savings or outcomes, and we do not claim any 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.

Frequently asked questions