Options are common in development and house-and-land deals and uncommon in ordinary home purchases. If one is put in front of you, the thing to understand is that you may be creating a duty liability on the day you sign, well before you own anything.
What they actually are
A call option gives the buyer the right to compel the owner to sell, usually within a set window and at a set price. A put option gives the owner the right to compel the buyer to buy.
Granted together, a put and call option arrangement means the sale will happen whichever way round it is triggered. It behaves like a contract of sale without being one yet, which is precisely why it is used and precisely why revenue offices look closely at it.
Why anyone uses them
Mostly to buy time. A developer may want to tie up a site while they get a planning decision, without committing to buy if the decision goes against them. A builder may want control of a block before finalising a build contract. The option period is the point.
When is duty payable?
This is where the states differ, and the differences are substantial.
New South Wales. Granting an option over land is itself a dutiable transaction, treated as a change in beneficial ownership. Ad valorem duty applies to the call option fee. A put option fee is not dutiable and does not form part of the consideration. Two consequences catch people out: the duty paid on the grant is not credited against the duty payable when the option is exercised, and it is not refunded if the option lapses unexercised.
Where a put option also exists, assigning or transferring the call option can attract call option assignment duty, charged on the dutiable value of the land rather than on the assignment fee. That is a large liability to discover late.
Queensland. The option agreement and the later transfer are treated as two separate transactions and assessed separately. Duty on the option agreement is calculated on the full consideration, including amounts that only become payable if a condition is later met. A credit for the option duty is available against the transfer, but only if the option agreement states that the option fee forms part of the consideration. If it does not say so, the duty is simply lost. That one clause is worth checking before signing.
Victoria. Options fall within the sub-sale provisions, which define an option broadly to include put options, call options and put and call arrangements. If the option is nominated to someone else for additional consideration, that nomination can attract duty of its own. If the land is developed between the option date and the transfer date, and the option holder has changed, further duty can apply.
The New South Wales cooling-off change
Separately from duty, 2025 amendments to the Conveyancing Act 1919 (NSW) brought both call and put options over residential property within the cooling-off rules. A contract formed by exercising the option has no separate cooling-off period. See cooling-off period (NSW).
What a buyer should watch for
- Ask what duty is payable on signing, not just on completion. The answer is often not zero.
- In Queensland, check whether the option agreement says the fee forms part of the consideration. Without that wording you pay duty twice in substance.
- Be careful about nomination. Transferring or nominating an option to another party can trigger its own duty, and in New South Wales that can be assessed on the value of the land.
- Get the option deed reviewed before signing. An option is not a standard contract and the terms are not standardised.
Each revenue office publishes guidance: Revenue NSW on transfer duty and options, the Queensland Revenue Office option agreements toolkit and the State Revenue Office Victoria on sub-sales.
Common questions
Is an option the same as a contract of sale?
No. An option creates a right to require a sale. The contract comes later, when the option is exercised. That gap is what creates the separate duty questions.
If the option lapses, do I get the duty back?
In New South Wales, no. Duty paid on the grant of a call option is not refunded if the option is never exercised.
Should a home buyer ever be signing one of these?
Usually not. Options are a development and investment tool. If you are buying a home to live in and someone puts an option deed in front of you, that is a reason to get advice before signing, not a formality.
General information only, not legal or tax advice. Option arrangements are heavily fact-specific and duty outcomes turn on the exact terms of the deed. Get advice on your own arrangement from a licensed conveyancer or solicitor, and confirm current duty treatment with the relevant revenue office.
