Settlement adjustments in Victoria: how rates, water and owners corporation fees are split
Your settlement date is locked in. The finance is sorted. Then the statement of adjustments lands in your inbox, and the final figure isn’t the purchase price you agreed. There’s a line asking you to pay part of the seller’s council rates, and you’re wondering why you’re covering a bill for a property you don’t own yet.
That’s a normal reaction, and the answer is simpler than the paperwork makes it look. Settlement adjustments are the way a property’s ongoing running costs, mainly council rates, water charges and owners corporation fees, get split fairly between the seller and the buyer, based on the settlement date. Each side pays only for the days they own the property. The seller usually covers these costs up to and including settlement day. The buyer usually takes over from the day after.
Here’s how each adjustment is worked out, where the traps are, and what changed for land tax in 2024.
What are settlement adjustments?
Settlement adjustments are calculations that divide a property’s recurring costs between seller and buyer, so each pays only for their period of ownership. Most of these costs are billed for a set period and are often paid in advance, so an adjustment makes sure neither side pays for time they didn’t own the place.
The obligation to prepare them comes from the contract itself. Where the standard LIV/REIV contract is used, General Condition 23 sets out how outgoings are adjusted. In practice, the buyer’s conveyancer prepares the statement of adjustments and sends it to the seller’s side to check before settlement.
The seller is usually responsible up to and including settlement day. The buyer is usually responsible from the day after. Every adjustment on the statement follows from that one principle, unless the contract says otherwise.
Council rates settlement in Victoria
Council rates are adjusted across the council’s rating year, which runs from 1 July to 30 June. Every Victorian council strikes rates for that year, and owners can usually pay in a lump sum or across four instalments.
How the adjustment works depends on whether the rates are paid or still owing:
- If the seller has already paid the full year’s rates and settlement happens partway through, the buyer reimburses the seller for the portion covering the period after settlement.
- If the rates haven’t been paid, the seller’s share up to settlement is deducted from their settlement funds, and the buyer takes on the account from there.
Rates follow the land, not the person. Any unpaid rates can stay attached to the property and must usually be cleared at settlement, which is why the adjustment matters. A buyer in Officer under Cardinia Shire and a buyer in Drouin under Baw Baw Shire see the same mechanism on their statement, just with a different council’s figures.
Water adjustment at settlement: service charge and usage
Water is adjusted in two parts, because a water bill has two parts.
The fixed service charge, the standing cost of being connected, is apportioned by date, the same way as council rates. The seller pays up to settlement, the buyer pays after.
Usage, the water the household used, is handled differently. The seller’s conveyancer usually arranges a special meter reading at or near settlement, so the seller pays for the water used before settlement and the buyer starts fresh. Without that reading, usage may need to be estimated, which is where disputes can start.
Owners corporation fees at settlement
If you’re buying an apartment, unit or townhouse in a managed complex, the owners corporation fees, sometimes called body corporate fees, are adjusted too. These cover shared costs like building insurance, common-area maintenance and management.
Regular owners corporation fees are apportioned by date, like rates. If the seller has paid the quarter or year in advance, the buyer reimburses them for the unused part.
Special levies are the trap. A special levy is a one-off charge the owners corporation raises for a specific project, like replacing a lift or repainting a building. It is not always split day by day like regular periodic fees. Who pays will depend on the contract, the date the levy was approved, the date it is due for payment, and whether it was disclosed before the contract was signed.
If a special levy is already approved or due before settlement, it is usually dealt with before or at settlement. If a levy is only proposed, or is approved between contract and settlement, it should be checked carefully against the contract and the owners corporation certificate. The certificate should disclose special fees or levies, including approval and due dates, and should also flag proposed works or extra charges. A levy that surfaces late can hold up settlement or become a legal issue rather than a simple adjustment.
For a townhouse in a newer Clyde North estate with an active owners corporation, this is worth checking early rather than the week before settlement.
What about land tax?
Land tax used to appear on many statements of adjustments. That changed. Under the Sale of Land Act 1962 (Victoria), for contracts of sale entered into on or after 1 January 2024, a seller can no longer pass land tax on to the buyer where the sale price is below a set threshold. According to the State Revenue Office, that threshold is $10,700,000 from 1 January 2026, and it’s adjusted each year in line with the Consumer Price Index.
In plain terms: for an ordinary home sale in the south-east Melbourne corridor, land tax should not appear as an adjustment at all. Many owner-occupied homes are exempt from land tax because of the principal place of residence exemption, and for contracts below the threshold the seller cannot pass land tax on to the buyer. If you see a land tax line on a residential statement of adjustments, it’s worth querying.
One thing still matters. Unpaid land tax remains a first charge on the land, so the purchaser’s conveyancer should obtain or update a land tax clearance certificate to confirm any outstanding land tax is paid at settlement. That protects the buyer from inheriting the seller’s tax debt, even though the buyer isn’t contributing to it. Contracts signed before 1 January 2024, and contracts at or above the threshold, may handle land tax differently.
A worked example
Say settlement falls on 15 October, part-way through the council rating year, and the seller has paid the annual council rates and the current quarter’s water service charge in advance. The buyer reimburses the seller for the days after settlement. The figures below are only there to show the method.
| Adjustment | Billed Amount and Period | Buyer’s Share of Days | Buyer Reimburses Seller |
|---|---|---|---|
| Council rates (paid in advance) | $2,000 for 1 Jul – 30 Jun | 258 of 365 | $1,413.70 |
| Water service charge (paid in advance) | $300 for 1 Oct – 31 Dec | 77 of 92 | $251.09 |
| Total added to the balance owed to the seller | $1,664.79 |
These figures are illustrative only. Real rates and charges vary by council, water authority and property. In this example both bills were paid in advance, so the buyer reimburses the seller and the final figure goes up. If the bills were unpaid, the seller’s share would instead be deducted from their proceeds.
What can go wrong with settlement adjustments
Even a routine adjustment can hit a snag:
- Delayed meter readings. If the water authority can’t read the meter in time, usage may be estimated and corrected later.
- Rates arrears found late. Unpaid rates or an overdue owners corporation account can surface close to settlement and need clearing from the seller’s funds.
- Special levy disputes. A levy approved or due near settlement can trigger a disagreement about who pays, especially if the Section 32 didn’t flag it. If a dispute can’t be settled through the figures, it can become a legal question about who is liable, not just a conveyancing one.
- A bill that arrives after settlement. Sometimes a final account lands once the property has changed hands. If the contract allows for re-adjustment, the parties can correct the figures so the right party pays. This is why many contracts include a re-adjustment clause.
Settlement delays change the maths too. If settlement is pushed back, the adjustments are usually recalculated to the new date. If the buyer caused the delay, the seller may seek to have adjustments run from the original date instead, depending on the contract.
Settlement adjustments FAQ
Are settlement adjustments negotiable?
Settlement adjustments follow a standard method set out in the contract, so the calculation itself isn’t usually up for negotiation. What can be negotiated is how a specific item is handled, such as a special levy approved before settlement, and that agreement should be put in writing and reflected in the figures.
Who calculates the settlement adjustments?
The buyer’s conveyancer or solicitor usually prepares the statement of adjustments, then sends it to the seller’s representative to check and confirm before settlement. Both sides agree the final figure before the day.
What is a rates adjustment at settlement?
A rates adjustment at settlement splits the council rates for the rating year between seller and buyer based on the settlement date. The seller covers rates up to settlement day and the buyer covers the rest, either by reimbursing rates the seller paid in advance or by taking on the unpaid balance.
What happens if a bill arrives after settlement?
If an outgoing bill for the property arrives after settlement, it may be re-adjusted between the parties so each pays only for their period of ownership. Check the contract, keep any late notice, and give it to your conveyancer before paying it.
Do settlement adjustments apply to a vacant block of land?
Yes. Vacant land still carries council rates and, in most cases, a water service charge, so those are adjusted the same way. There are usually no owners corporation fees unless the block is part of a plan of subdivision with common property, and no water usage to read if the land isn’t connected.
Is land tax still adjusted at settlement in Victoria?
For most ordinary residential sales, no. Since 1 January 2024, a seller can’t pass land tax on to the buyer for contracts under the State Revenue Office threshold, which is $10,700,000 in 2026, so land tax should not appear on the statement for an ordinary residential sale below that threshold.
When your adjustments are finalised
Your adjustments are finalised at settlement, usually in an electronic lodgment network such as PEXA. The figures are locked in as the title transfers and the money moves. If a late bill or an error turns up afterwards, a re-adjustment clause may allow it to be put right, so keep any rate or water notice that arrives in the weeks after settlement and pass it to your conveyancer rather than just paying it.
The practical step before settlement is to have someone check the statement of adjustments line by line against the actual rate notices, water account and owners corporation certificate, because that’s where errors hide. If you’d like Conveyancing Today to prepare and check the adjustments on your settlement, send through your contract of sale and the latest rate and owners corporation notices, and we’ll help check the final figure before you have to fund it.