The Rise of the ‘Ghost Buyer’ – How Nomination Clauses Are Being Exploited in Victoria
/By David Dawn, Licensed Conveyancer – Victorian Property Settlements
At first glance, a nomination clause in a property contract seems simple enough: it allows the named purchaser to nominate another person or entity to complete the transaction. Commonly used by family trusts, SMSFs, or business partners, it can offer flexibility when used correctly.
But in recent years, nomination clauses have become a vehicle for a much more controversial strategy — where the original purchaser is not the intended buyer at all, but rather a middleman seeking to flip the contract to someone else for profit. This figure is what many in the industry now call the “ghost buyer.”
While this practice isn’t always illegal, it can expose all parties to significant financial, legal, and tax risks. As property values rise and off-market deals grow, so too does the temptation to exploit these clauses — often with little understanding of the consequences.
This article explores how nomination clauses are being used (and misused) in Victoria, what buyers and sellers need to be aware of, and how to protect yourself against the risks.
What Is a Nomination Clause?
In Victorian contracts, most standard property sale agreements include a clause allowing the purchaser to “nominate another person or entity” to take over the purchase before settlement.
This means:
The contract remains binding on the original purchaser
The nominated party becomes the buyer at settlement
No new contract is needed
No additional stamp duty is usually payable — unless there’s a sub-sale
But that final point is where things can become dangerous.
How Nomination Is Being Exploited
The typical misuse involves a person signing a contract under their own name (or a shelf company), intending not to complete the purchase but to on-sell the contract — for a fee — to another buyer.
Here’s how it works:
Buyer A signs a contract to buy a property for $950,000
They find Buyer B, who agrees to purchase the property for $1,050,000
Buyer A nominates Buyer B, who settles the original contract
Buyer A pockets the $100,000 difference — either as a direct fee or via reimbursement
If the transaction is not properly documented, this may be classed as a sub-sale under the Duties Act 2000 (Vic), and Buyer B could be hit with double stamp duty.
What the Law Says
Under Section 32J of the Duties Act, a nomination will be deemed a sub-sale if:
There is consideration flowing to the original purchaser from the nominee
There is a land development agreement or option created before settlement
There is an agreement to transfer beneficial ownership before settlement
In these cases, both transfers may be dutiable, or the Commissioner of State Revenue may treat the transaction as two separate acquisitions.
This has serious consequences:
Unexpected stamp duty liability
Breach of ATO reporting obligations
Penalties for undeclared capital gains
Potential cancellation of the contract if not disclosed
Real-World Risks for Buyers and Sellers
For sellers, the main concern is whether the purchaser actually intends to settle. If the contract falls over late due to the nominee withdrawing, the vendor may:
Lose weeks of marketing time
Face relisting costs or reputational damage
Be exposed to default if settlement cannot be completed
For buyers, the risks are even greater:
Stamp duty may be assessed twice
The ATO may investigate undeclared profits
Delays in nomination paperwork can cause late settlement
Bank finance may not be transferable to the nominee
Liability remains on the original purchaser if the nominee defaults
We’ve seen multiple transactions where the nominee refused to proceed, leaving the original buyer — who never intended to settle — on the hook.
Developer Contracts and Nomination Clauses
Some developers actively encourage nominations — especially with off-the-plan properties. It can assist with presales and reduce default risk.
However, most contracts now include:
Nomination fees (e.g. $1,000–$5,000)
Consent conditions (developer must approve the nominee)
Restrictions on nomination within the last 14 or 30 days of settlement
Prohibitions on assignment for consideration (to avoid sub-sale duty)
If you’re purchasing off-the-plan with a view to nominating, you must read the fine print and seek advice well before attempting to on-sell the contract.
What You Should Do
For purchasers:
Only use nomination if it serves a genuine legal or financial structure
Avoid accepting consideration from your nominee
Finalise nomination early — at least 14–21 days before settlement
Document the nomination properly — especially if third-party funding is involved
Disclose any resale or reimbursement arrangements to your conveyancer
For vendors:
Ask for the name of the actual buyer early
Include a special condition limiting nomination or requiring consent
Consider a “no consideration” declaration as part of the nomination
Keep detailed records of who signs, who nominates, and who settles
Why It Matters Now More Than Ever
As interest rates rise and developers tighten contract controls, more buyers are turning to nomination as a speculative or financial tool. But few understand the legal complexities involved.
At Victorian Property Settlements, we advise both purchasers and vendors on how to handle nomination safely — or when to avoid it altogether. Whether it’s structuring the purchase through a trust, nominating a family member, or reviewing a contract with unusual conditions, we can help ensure you stay compliant and protected.
📞 Call us on (03) 9783 0111
🌐 Visit: www.victorianpropertysettlements.com.au