In Victoria, settlement day is when the buyer pays the balance of the price and outgoings such as council rates are adjusted between buyer and seller. In NSW, the buyer’s lawyer or conveyancer enters the payment details in an electronic workspace beforehand, and at the scheduled time, if all the documents and finances are ready, the settlement happens automatically.
General informationGeneral information about how money moves at settlement, not legal, tax or financial advice about any sale. The official pages are Consumer Affairs Victoria’s, the NSW Government’s, the State Revenue Office Victoria’s and the ATO’s.
The balance, and who may direct it
The states describe the payment in much the same terms. In Victoria the buyer pays the balance of the purchase price on the day. In South Australia, once the balance is paid, the buyer becomes entitled to be registered as the owner. In the Northern Territory, the final payment is made by the legal and financial representatives acting for buyer and seller.
In NSW the buyer’s subscriber prepares the documents and the financial information electronically, entering the EFT or BPAY details, with any mortgagee or other authorised party, in a shared electronic workspace. Cheques and paper documents are no longer required.
Queensland’s Property Law Act 2023 says when a payment direction discharges the buyer. Under section 82, a written direction about paying money under a contract for the sale of land, given by the seller’s authorised agent to the buyer or the buyer’s authorised agent, is “sufficient discharge” of the buyer for that payment. An authorised agent, for that section, is a legal practitioner or a manager of a financial institution.
Where the funds wait, in a Victorian electronic settlement
Consumer Affairs Victoria explains the money side to licensed conveyancers, and its page shows where a buyer’s funds can sit before the day. A licensed conveyancer who settles online must use the national electronic conveyancing system.
The funds can go through the conveyancer’s own general trust account, linked to the network, or to a financial institution that subscribes to it. Where the institution does not subscribe or the trust account is not linked, they can be paid into the network operator’s source account: an account in the operator’s name, run by it, that can receive funds from outside parties. Where the conveyancer has no trust account, the client can also pay straight into that account.
Two rules keep the client in charge of the money:
- under the Sale of Land Act 1962, deposit money can move from a trust account to the source account only if the client expressly directs it
- the conveyancer needs the client’s authority to direct the operator to pay out any funds it holds on settlement.
For a conveyancer who uses the source account, the regulator sets out four things to be aware of:
- the operator limits its liability in various circumstances
- the account is not a trust account under the Conveyancers Act 2006, and is outside that Act’s audit regime
- interest on it accrues to the operator, not to the parties to the sale or the Victorian Property Fund
- the client or the buyer may be able to claim on the Victorian Property Fund only if the conveyancer is responsible for the loss.
NSW has a fund for a related risk: if a conveyancer is dishonest with money a client has entrusted to them, the client may have access to the Property Services Compensation Fund, run by NSW Fair Trading.
Adjustments: the line through settlement day
At settlement in Victoria, outgoings such as rates and other charges are adjusted between buyer and seller. Where the line falls depends on the state. In Victoria and Queensland the seller is responsible for rates up to and including settlement day, and the buyer from the next day. South Australia generally puts the seller’s share up to and including midnight before the settlement date, so the day of settlement is the buyer’s. In the Northern Territory, outstanding council rates and other charges are settled at the same time as the other payments; the Territory’s page does not say where the line falls.
An illustration, with invented figures
Take an invented council rates bill of $920 for the quarter from 1 October to 31 December, 92 days, which the seller has already paid in full: $10 a day. Settlement is on 13 November.
On Victoria’s and Queensland’s line
- Seller’s days
- 1 October to 13 November: 44 days, $440
- Buyer’s days
- 14 November to 31 December: 48 days, $480
- Buyer’s share, credited to the seller
- $480
On South Australia’s line
- Seller’s days
- 1 October to 12 November: 43 days, $430
- Buyer’s days
- 13 November to 31 December: 49 days, $490
- Buyer’s share, credited to the seller
- $490
The one day that changes sides is worth $10 here. A real adjustment works from the actual bill and the terms of the contract.
Tax that settles with the land
Some amounts are paid out at settlement because they follow the land, or because the law makes the buyer collect them.
Land tax in Victoria
The State Revenue Office calls unpaid land tax, with its interest and penalty tax, a first charge on the land. That puts it ahead of a mortgage or any other encumbrance, and a sale does not remove it, which is how a buyer can end up liable. The State Revenue Office takes no part in settlement arrangements; if tax secured by a charge on the land is still unpaid after settlement, it may enforce the charge and seek payment from the buyer. Under section 96 of the Land Tax Act 2005, a buyer who has applied for and obtained a property clearance certificate cannot be made to pay more than the land tax charge the certificate shows.
Duty in Victoria
Land transfer duty is usually paid at settlement, and the buyer cannot receive the transfer of the title until it has been paid. The State Revenue Office says that if duty is not paid within 30 days of settlement, penalty tax and interest may apply.
Amounts withheld for the ATO
The ATO applies foreign resident capital gains withholding to all real property sales, with exclusions; one is a seller who is an Australian resident for tax purposes and holds a valid clearance certificate at or before settlement. Without one, the buyer withholds an amount from the sale proceeds and pays it to the ATO. The buyer pays any amount withheld to the ATO at or before settlement.
Where a buyer has to withhold GST and pay it to the ATO, the payment is due, under a standard land contract, on the day of settlement.