How to Handle a Nomination Clause Safely in Victoria
A nomination clause looks simple on paper, but in Victoria it carries a long list of traps for both buyers and sellers. It allows a purchaser to nominate another person or entity to take over the purchase before settlement. When handled correctly, it gives flexibility. When handled poorly, it can trigger double stamp duty, finance collapse, contract breach or the loss of important duty concessions.
Below is a clear explanation of how nomination clauses work in residential property contracts in Victoria, the risks involved and how to manage them safely under Victorian legislation, including the Duties Act 2000 and the Land Transfer Act 2018.
What a Nomination Clause Actually Is
A nomination clause lets the original purchaser direct the vendor to place the title into the name of another person or entity at settlement. In older contracts this appeared as “and/or nominee”, although modern Victorian contracts generally allow nomination even without those words.
Nomination is not a new contract. It is simply a direction from the original purchaser to the vendor about who will take the transfer.
Most nominations happen because the purchaser wants to:
• add or change who will be on title
• switch the purchase into a company or trust not yet formed at signing
• match the purchaser’s name to the borrowing entity
• adjust ownership for tax or asset-protection reasons
• include a spouse or partner after signing
When Buyers Use Nominations
Buyers often rely on nomination clauses for convenience. Common situations include:
• setting up a company or trust after signing
• adding a spouse or partner to the title
• asking a family member to join the purchase for lending support
• attempting to switch ownership for tax planning
Flexibility sounds appealing, but it only works safely when the nomination is done early, correctly and with full awareness of the legal and financial implications.
The Major Risks Most People Miss
Double Stamp Duty Under the Duties Act 2000
This is by far the biggest trap.
Under the Duties Act 2000, particularly the sub-sale rules, a nomination can attract double duty if there is any additional consideration, benefit or arrangement between the original purchaser and the nominee.
If the State Revenue Office considers the nomination to be a sub-sale, the following can occur:
• duty charged on the original contract
• another full round of duty charged on the nominee’s transfer
A second round of duty often costs tens of thousands of dollars and is usually identified right before settlement when it is too late to unwind.
The law also treats certain actions as “land development” before nomination. This can include applying for a planning permit, preparing subdivision plans or doing any work likely to increase value. If the original purchaser undertakes land development before nominating, the SRO can treat the nomination as a sub-sale and charge duty again.
The safest rule is simple: do not take any steps that change or enhance the land until the nomination has been completed.
Finance Problems
Lenders approve loans based on the purchaser named in the contract. If the borrower changes by nomination, the bank may not accept the new entity or person.
Problems include:
• finance approval becoming invalid
• complete reassessment required
• delayed settlement
• risk of default, penalty interest or termination
If a nomination is planned, the lender must know early so approval is issued in the correct name. A last-minute nomination almost always creates settlement risk.
Loss of Grants or Concessions
Nominating a new purchaser can wipe out government benefits, including:
• First Home Owner Grant
• first-home buyer duty concessions
• principal place of residence concessions
• off-the-plan concessions
• eligibility for reduced duty if a purchaser is foreign
If the nominee does not meet the entitlement criteria, all concessions are lost. These cannot be retrospectively fixed.
The Original Purchaser Stays Liable
Under Victorian contract law and the Land Transfer Act 2018, nomination does not release the original purchaser from liability unless the vendor expressly agrees. That almost never happens.
If the nominee fails to settle, the vendor is entitled to pursue the original purchaser.
Nomination is not an escape clause. It does not transfer liability.
Regulatory Scrutiny
Misused nominations can attract attention from regulators. Nomination arrangements that resemble on-sales, price-flips, under-the-table payments or foreign purchaser substitutions are routinely reviewed.
The safest approach is transparency, proper documentation and clear evidence that no additional consideration has passed.
Common Examples of Nomination Mistakes
Late Nomination
A buyer waits until days before settlement to nominate a company. The contract required 14 days’ notice. The vendor rejects the late nomination, delaying settlement and creating exposure to penalty interest.
Double Duty Triggered
A purchaser applies for a planning permit after signing, but before nominating their spouse. The permit counts as land development. The SRO assesses double duty.
Lost First-Home Benefits
A first-home buyer nominates a sibling as co-purchaser. The sibling already owns a property, cancelling the concession and grant.
Finance Collapse
A purchaser nominates a trust shortly before settlement. The loan was in the original purchaser’s name. The bank rejects the new borrower and settlement fails.
Key Victorian Legislation
Duties Act 2000
This Act governs stamp duty in Victoria, including the sub-sale provisions and the circumstances that trigger double duty. Sections 32 to 32J deal specifically with transactions involving nominations and subsequent transfers.
Land Transfer Act 2018
This Act governs how land transfers occur in Victoria, including transfers to nominees. It supports the process of directing title to a nominee at settlement.
Property Law Act 1958
This Act limits the extent to which a purchaser can be required to pay vendor costs. Some special conditions attempting to charge nomination fees may be unenforceable.
How Buyers Can Nominate Safely
• decide early who the real purchaser will be
• avoid nominations unless absolutely necessary
• never accept or provide payment for a nomination
• avoid any land development activities before nomination
• alert the lender as soon as possible if a nomination is planned
• confirm how any grant or concession will be affected
• complete a deed of nomination correctly and early
• provide a statutory declaration confirming no consideration passed, where appropriate
• get proper advice before signing the contract and before nominating
Guidance for Sellers
• a valid nomination does not change the purchase price
• the original purchaser remains liable even after nomination
• request a properly executed deed of nomination
• ensure the transfer of land is prepared in the correct name
• be cautious where the nominee appears to be a foreign purchaser
• understand that large nomination fees may not be enforceable under Victorian law
Final Word
A nomination clause can be useful, but in Victoria it is never simple. The risks under the Duties Act 2000 are significant. Finance, concessions and settlement timing all depend on getting the process right.
Buyers should only nominate when there is a genuine need, and always well before settlement. Sellers should ensure the paperwork is correct while remembering that the original purchaser remains liable.
Handled carefully, nomination can work. Handled casually, it can be one of the most expensive mistakes made in a property transaction.