Call Option vs Put and Call in SA: Managing Stamp Duty and Nomination Risks

The Strategic Role of Option Agreements in Land Acquisition

When aggregating land or securing infill development sites across metropolitan Adelaide, developers and landowners frequently use option agreements to balance planning approvals against capital outlays. A well-drafted option gives a developer the time needed to assess planning rules, submit land division applications, or seek planning consent through the council or the South Australian planning system, without committing the full purchase price upfront. For the vendor, an option can secure a committed buyer at an agreed exit value while the vendor retains title during the due diligence period.

However, choosing the contractual structure requires careful legal and tax assessment. In South Australia, stamp duty on land transactions is administered by RevenueSA under the Stamp Duties Act 1923. The structural differences between a unilateral Call Option and a bilateral Put and Call Option may affect not only the parties’ legal rights but also when and how stamp duty applies. A poorly considered structure may create cash-flow pressure, or additional stamp duty cost when a final transferee is nominated.

Unilateral Call Option vs Put and Call Option: Legal Obligations and Stamp Duty Considerations

The key distinction between the two option types is how far the parties’ promises bind each other:

• Unilateral Call Option: A call option gives the grantee (the developer) the legal right, but not the obligation, to purchase the land at a specified price within a defined window. The grantor (the landowner) is bound not to deal with the land elsewhere during this period.

• Bilateral Put and Call Option: Under a put and call structure, the developer holds a call option (to require the vendor to sell) and the vendor holds a put option (to require the developer to purchase). Because both parties are bound, the arrangement is closer in legal character to a binding agreement for sale.

This difference in obligations may affect how stamp duty is assessed. Under section 31 of the Stamp Duties Act 1923 (SA), a written contract or agreement for the sale of land may be charged ad valorem duty as if it were a conveyance, and RevenueSA’s Stamp Duty Document Guide has a specific category for options to purchase. Whether duty applies to a particular option, when it applies and on what consideration depend on the terms of the agreement and RevenueSA’s assessment. Other states (for example New South Wales) have their own specific duty rules for the grant and transfer of options, and these cannot be applied directly to South Australia.

For projects that depend heavily on cash flow, the timing of stamp duty affects the working capital plan. Investors should refer to RevenueSA’s stamp duty calculation and policy guidance for the assessment principles and lodgement deadlines that apply to land transactions.

Nomination and the Risk of Additional Stamp Duty

Developers commonly sign initial site acquisition documents through a parent holding entity or an advisory trustee, intending to nominate a project-specific Special Purpose Vehicle (SPV), builder entity or joint venture partner to take the final transfer before settlement. In South Australia, RevenueSA has specific treatment for nominee contracts and assignments of land contracts:

• Assignment of a Land Contract: Assigning contractual rights may attract ad valorem transfer duty on the consideration for the assignment, and the final transfer of the land is still dutiable on the total purchase price under the contract, so a transaction may involve more than one dutiable step.

• Nominee Contracts: For land conveyed under a nominee contract, RevenueSA has a separate declaration process. The method, consideration and timing of the nomination may produce different stamp duty outcomes and should be checked before signing.

• Foreign Ownership Surcharge: If the option holder or the nominated entity involves foreign persons, RevenueSA’s guidance on the foreign ownership surcharge indicates that the grant of an option may itself be treated as acquiring an interest in residential land, and this needs separate assessment.

Whether to retain a Put Option, and how to draft nomination and assignment clauses, should therefore be assessed together at the outset with the vendor’s requirements and the development’s tax structure, rather than relying on a template contract.

Drafting Safeguards and Due Diligence Priorities

To preserve transaction flexibility and financial discipline during site acquisition, parties should consider the following points when structuring option agreements:

• Evaluate the Necessity of the Put Option: Developers should assess whether a vendor’s insistence on a put option is worth the potential cash-flow cost. If the vendor requires a put option, any resulting duty cost should be included in the project feasibility.

• Carefully Structure Nomination Clauses: Where rights are to be held across multiple entities or syndicates, the mechanics of how and when a nominee is introduced should be reviewed by a lawyer or tax adviser before signing, and a RevenueSA assessment or ruling can be considered where certainty is needed.

• Align Option Windows with Planning Timeframes: The option exercise period should reflect realistic timeframes for planning assessment, engineering investigations and referral requirements. An unrealistically short option term may force the developer to exercise before development consent is secured.

• Obtain Independent Professional Advice: Option agreements raise complex property law and tax issues. Before signing binding documents, landowners and developers should obtain independent written advice from a qualified lawyer, conveyancer and tax adviser on the specific site and transaction structure.

Sources

• Stamp Duties Act 1923 (SA) | legislation.sa.gov.au

• Stamp duty document guide | RevenueSA

• Foreign ownership surcharge: applicable transactions | RevenueSA

• Calculate stamp duty | RevenueSA

• CPN 037: Grant of options to purchase land (New South Wales, for comparison only) | Revenue NSW

Illustrative image only — not a photograph of a Cyberate PM project. Photo by Thirdman on Pexels.