Put and Call Option Property Australia: How It Works, Duty and Funding
Property Lending Hub
Put and Call Option Property Australia · New South Wales Duty · Funding, Exercise and Settlement
A put and call option can bind a property transaction before the buyer owns the land. This guide follows the whole journey: what to check before signing, what a lender needs, how the option fee and settlement are funded, how duty differs by jurisdiction, what happens if valuation or approval changes, what assignment or a put exercise does to the exit, and what comes after settlement.
Quick Answer
A put and call option over property gives the buyer a right to require the owner to sell and gives the owner a corresponding right to require the buyer to purchase. Until the option is exercised, the buyer does not own the land, so a normal mortgage cannot draw against that land. The option period is therefore the funding window: approval, valuation, option-fee funding, purchaser structure, duty and settlement cash should be worked through before exercise. If the purchaser will change to a nominee, SPV, trust or assignee, deal with that before settlement rather than assuming the original approval and duty position will follow automatically.
Start where you actually are
Eight different customer situations lead to this page. Find the one that matches the decision in front of you.
| Where you are now | The question to answer first | Start here |
|---|---|---|
| You have been handed a deed and have not signed it | What rights and obligations start now, and which exits disappear once the deed becomes binding? | What the option actually does |
| You are choosing between an option, due diligence clause or long settlement | Which structure gives the time you need without creating the wrong funding obligation? | Compare the structures |
| You have signed and now need the funding | What can the lender assess now, and what cannot be secured until settlement? | Can you finance it |
| The broker has asked for documents | What should go into one complete lender pack so the real constraint appears early? | Lender pack and timeline |
| You need to assign, nominate or change the purchaser | Does the deed permit it, and does the change create duty or require a new credit structure? | Nomination, assignment and purchaser changes |
| You own the land and a developer wants an option | What happens to your mortgage, ability to refinance, use of the land, holding costs and tax while the option runs? | The landowner side |
| The exercise date is close and funding is not ready | What does the deed still allow before you reach for short-dated credit? | Routes when funding is not there |
| The option has been exercised or settlement has happened | What funds the holding period and gets the project from acquisition to construction? | After exercise and settlement |
What is a put and call option in property, and how does it work?
A put and call option in property is an agreement over land that gives the buyer a right to require the owner to sell and gives the owner a corresponding right to require the buyer to purchase, on the terms and within the periods set by the deed.
Until an option is validly exercised, there is not yet a contract of sale under the usual option structure. The buyer holds rights under the deed rather than registered title, so the ordinary purchase mortgage cannot simply draw against the optioned land before settlement. The New South Wales revenue office describes a valid exercise as the point at which the sale contract immediately comes into effect.
The call option is the buyer's right to require the owner to sell. The put option is the owner's right to require the buyer to purchase. Once any applicable cooling-off rights, conditions and other exits have expired or been dealt with, the put can remove the buyer's practical ability to let the transaction simply lapse. The deed and the law that applies to it decide the legal result, so this is a document to have reviewed before signing.
| Term | Whose it is | What it does |
|---|---|---|
| Grantor | The landowner | The party who gives the option. Usually the owner of the land, and the party who receives the option fee. |
| Grantee | The buyer | The party who receives the option. Holds a contractual right to acquire the land, not title to it. |
| Call option | The buyer's right | The right to require the owner to sell. Exercising it brings the sale contract into existence. |
| Put option | The owner's right | The right to require the buyer to buy if the buyer has not exercised the call option by the exercise date. If it is validly exercisable and exercised under the deed, it can materially reduce the buyer's ability to simply let the transaction lapse. |
| Option fee | Paid by the buyer | The consideration for the grant of the right. Whether it is credited to the price or forfeited is decided by the deed, not by a rule. |
| Exercise | Either party, depending on which option | The act of using the right. It brings a contract of sale into existence on the terms already attached to the deed, and settlement follows from there. |
If the property is residential in New South Wales, is there a cooling-off period on a put and call option?
Usually yes at the option stage, subject to statutory exceptions. New South Wales law now applies the residential option cooling-off regime to both options to purchase and options to compel purchase, which includes put options. The statutory cooling-off period generally ends at 5pm on the fifth business day after the option is granted, although it can be excluded or shortened in the circumstances allowed by the Act.
The change matters because it closed an old uncertainty around put options. It commenced on 15 August 2025. A contract that comes into existence because an option is exercised does not receive a fresh cooling-off period. From 1 June 2026 the updated prescribed cooling-off notice must be used for residential contracts and option agreements. See the New South Wales Registrar General guidance and the current Conveyancing Act 1919. This is a solicitor or conveyancer question, not a finance condition, and the deed should be checked before it is signed.
Can a foreign buyer wait until exercise to think about foreign investment approval?
No, not safely. Australian foreign investment guidance says a call option can itself be the point at which a foreign person acquires an interest for screening purposes, even though title will transfer later. Conditions precedent can change when the acquisition is taken to occur, so the actual drafting matters.
If the buyer, company, trust or investor group may be a foreign person, raise the issue before signing the option, not at exercise. Residential, commercial, agricultural and national-security land have different rules and thresholds. The current starting point is the Australian Government's Key concepts guidance; the actual position belongs with a solicitor experienced in foreign investment.
Put and call option vs due diligence, finance condition or long settlement: what is the difference?
They solve different problems. A put and call option controls a future site acquisition before the buyer owns the land; a due diligence or finance condition sits inside an existing sale contract; a deferred or long settlement leaves the sale in place but pushes completion out.
This distinction matters to funding because the document tells the lender what obligation already exists, what exit the buyer still has, and when title can become security.
| Structure | Is there already a sale contract? | Buyer's exit | What it is usually trying to solve | Funding consequence |
|---|---|---|---|---|
| Call option only | Not until exercise under the usual structure. | Buyer can generally choose not to exercise, subject to the deed, and may lose amounts paid. | Control of a site while planning, feasibility or another condition is worked through. | No registered title for the buyer before settlement; finance is prepared to draw later. |
| Put and call option | Not until valid exercise under the usual structure. | More limited because the owner may be able to compel the purchase under the put. | Give the buyer time while giving the owner greater certainty of a sale. | Treat the option period as the deadline for making the eventual purchase fundable. |
| Contract subject to due diligence | Yes. | Only through the due-diligence condition as drafted. | Allow investigation after exchange without using an option structure. | Lender sees an existing contract plus a condition that may still end it. |
| Contract subject to finance | Yes. | Only if the finance condition is effective and its requirements are met. | Protect the buyer if the specified finance is not obtained. | The finance condition has its own deadline and should not be confused with an approval promise. |
| Unconditional contract with a long settlement | Yes. | No finance exit unless separately negotiated. | Give time before completion without delaying the existence of the sale. | Purchase finance follows an ordinary contract path, but approval and valuation may still need refreshing before settlement. |
Also called: put and call option agreement, put and call option deed, call option deed, option to purchase land.
What changes if you are assembling several adjoining sites under options?
The funding problem becomes portfolio-shaped rather than site-shaped. Option fees, duty, valuations and settlement equity can all be required across several titles, while the development only works if enough of the assembly completes. A lender will want to understand which lots are essential, which can fall away, whether exercise dates line up, and what the project looks like if one owner does not proceed. Long control periods can also sit close to land banking questions, depending on what is being done with the sites.
That is also why assignment, nomination and buyer-entity decisions should be settled before the structure grows. A change that looks administrative on one lot can have a duty consequence and can change the security package across the whole assembly. The legal architecture belongs with the solicitor; the finance model should be run across the complete acquisition rather than one option fee at a time.
Can you get a loan on a property that is under a put and call option?
Not as a normal purchase mortgage that draws against that land before settlement. Before exercise and settlement the buyer does not hold registered title, so the lender cannot rely on the ordinary first mortgage over the optioned property. What the lender can do is assess the future acquisition and prepare a facility to draw when the sale settles.
That makes the useful question not “will a lender finance an option?” but “what can be completed inside the option period so settlement finance is ready when the right is exercised?” The answer is the credit assessment, valuation, security structure, borrower contribution, duty and settlement cash, and the exit or development plan.
A lender can assess the proposed purchase using the deed and its annexed sale contract, subject to the lender's policy and the rest of the file. The facility is then documented to draw at settlement once the purchase exists and the security can be established. That is the acquisition leg of site acquisition and development finance; how development finance works covers the staged structure after the land is owned.
The separate question is whether any interest can be protected on title before exercise. Whether something can be lodged, what kind of interest it would be, and whether the deed permits it at all, depends on the terms of the deed and on the state the land is in. Name it as a question and put it to your solicitor before the deed is signed. It is not a question a broker or a lender answers, and this page does not answer it either. What is worth knowing on the funding side is that anything lodged on the grantor's title has consequences for the grantor's own borrowing as well as for the buyer's protection, which is covered in the landowner section below.
If something is lodged on the title, what does that do to the borrowing?
It becomes visible to every lender that looks at that land afterwards, on both sides of the deal, and that is the part worth understanding even though the legal question belongs to a solicitor.
Whether a buyer holding a call option can protect an interest on title, on what basis, and whether the deed permits it at all, is a legal question with a different answer in different jurisdictions. This page does not answer it and neither does a broker. What a broker can tell you is what the answer does to the funding, which is not a small thing and which almost nobody sets out.
For the buyer, an interest protected on title is protection, and it is also a thing that has to be dealt with at settlement, so it belongs in the settlement plan rather than being left to the day. For the landowner, it is the more consequential half. You still own the land during the option period, you may still need to borrow against it, and anything sitting on the title is something a lender assessing that land as security will see, ask about and want resolved. Removing it is not usually in the landowner's sole gift either, which is why the time to settle whether anything can be lodged, and on what terms it comes off, is when the deed is being drafted.
Two practical consequences. If you are the landowner and your plan for the option period involves refinancing, releasing equity or offering the property as security for anything at all, test that plan against the deed before you sign it. And if you are the buyer, understand that asking for title protection is asking the landowner to give up flexibility they may be relying on, which is why it gets resisted and why it gets priced.
One boundary line before moving on. For a foreign buyer, taking an option over Australian land can raise foreign investment requirements that carry their own timing and their own consequences for the exercise date. That is a matter for your solicitor, and it belongs in the conversation before the deed is signed rather than after.
What does a lender need for put and call option finance, and when should you start?
Start before signing if funding is capable of changing whether the deal works; otherwise start as early as possible in the option period. The lender needs enough information to assess the future purchase, the borrower, the security at settlement and every dollar that has to be available before title transfers.
The biggest avoidable mistake is sending only the option deed. The deed proves the transaction. It does not prove the buyer can fund the option fee, duty, settlement contribution, valuation shortfall or the next stage of the project.
| Item | Why the lender needs it | What a late discovery can change |
|---|---|---|
| Full draft or executed option deed and every annexure | Shows the parties, purchase price, option fee, exercise mechanics, dates, assignment rights and the sale contract that will arise. | A date, condition or restriction can make the proposed funding timetable impossible. |
| Borrower, company and trust structure | The entity exercising the option has to match the entity that will borrow, own the land or be permitted to nominate. | Changing purchaser later can require legal changes, create duty issues or force a fresh credit assessment. |
| Current financial evidence | For a self-employed buyer this may include financial statements, tax material, BAS, bank statements and current trading evidence, depending on the lender. | An early approval based on old numbers may not survive to exercise. |
| Existing debt and security schedule | Shows what property is already mortgaged, what equity is genuinely available and which lenders may need to consent or be repaid. | The same equity may have been counted twice: once for the option fee and again for settlement. |
| Source of option fee, deposit, duty and settlement contribution | These cash requirements occur at different times and not all can be funded against the optioned land. | A transaction can be credit-approved and still fail because the cash contribution was never fully mapped. |
| Property, access and valuation information | The facility is sized against the lender's accepted value and security, not simply the agreed price. | A valuation shortfall becomes additional cash the buyer must find. |
| Planning status, feasibility and development material | For a development acquisition, the lender needs to understand why the site is being bought and what the exit or next facility depends on. | A site that only works after a planning outcome needs a different risk and exit analysis from a completed investment property. |
| Solicitor and accountant position on duty, GST and settlement mechanics | Those amounts determine the real funds required before and at settlement. | Duty or tax cash can consume money the borrower expected to contribute to the purchase. |
| Exit, refinance or construction plan | A short acquisition facility only works if the next step is credible and timed. | The buyer can reach settlement and still have no viable facility to hold or develop the site afterwards. |
| Stage | Funding job | Decision you want before moving on |
|---|---|---|
| Before signing, where possible | Test borrower structure, other security, option-fee source, likely valuation basis, duty cash and the effect on other borrowing. | Is there a plausible funding path, and does the deed need to change before the buyer commits? |
| Immediately after signing | Give the lender the complete deed pack and borrower information; start the credit and valuation work at the point it becomes useful. | What is missing, and which problem has the longest lead time? |
| Mid-option period | Update planning, feasibility, financials, other borrowing and security; solve any valuation or contribution gap while time remains. | Has anything changed enough to alter the lender, structure or borrower contribution? |
| Before exercise | Confirm approval and valuation are current, conditions can be met, duty has been dealt with, and settlement equity is available. | If the option is exercised today, is there a credible path all the way to settlement? |
| Settlement | Facility draws, title transfers, lender security is established and any temporary funding is accounted for. | What has to be refinanced, repaid or rolled into the next facility? |
| After settlement | Fund the holding period, remaining approvals and construction or refinance path. | Is the facility that got you to settlement also the right facility to hold or build the site? |
The funding pack is also the answer to the customer question that comes immediately after “can I get a loan?”: what should I send the broker today? Sending it as one package gives the lender a chance to identify the real constraint while the option period still has room in it.
What will a valuer value, and at what date?
A valuer gives an opinion of the property's value at a stated date using the evidence and assumptions relevant to that instruction. The option price is still the amount the buyer has agreed to pay, but the lender sizes the facility using the value and valuation basis it accepts under its own credit policy.
That distinction matters because the price can be fixed at the start of a long option period while the valuation is obtained or refreshed much later. In between, the planning position, market evidence, site condition and feasibility can move. If the lender's accepted value lands below the price the deed requires the buyer to pay, the resulting contribution gap has to be funded from somewhere else. What happens when a valuation comes in under the contract price works through the same problem in a settlement context.
If the site is worth more after a DA or planning approval, can the uplift count as equity?
Sometimes, but never assume all of the uplift will be treated as borrower equity. A higher current as-is valuation can strengthen the security position, particularly where planning work completed during the option period has changed what the market will pay for the site. The lender still decides which valuation basis it will use, whether it recognises value above the option price, and what minimum cash or equity contribution it requires from the borrower.
The practical test is therefore two numbers, not one: what are you contractually required to pay, and what value will this lender actually lend against? If the accepted value is higher, the funding position may improve. If it is lower, the buyer has a shortfall. Neither outcome should be assumed from the DA alone, and any planning uplift should be tested with the proposed lender before the option is exercised.
The prudential regulator's guidance to banks explains why agreed price and lender value are separate concepts, and why the valuation date matters to the lender rather than only to the borrower.
What the prudential guidance actually says
Neither line is a rule that applies to you, and neither is a figure. They are the published reasoning that explains why an agreed price and a valuation can part company inside an option period.
Two things follow from that. Prudential guidance binds banks, not every lender: non-bank and private lenders sit outside it and take their own view, which is part of why the answer to whether a deal is fundable can differ between one lender and the next. And a valuation is an opinion at a date. It is not a prediction, and it is not something a borrower can influence, so the only sensible response to valuation risk is to find it early, while the option period still has room in it. The three numbers that decide a development finance approval sets out what a lender is solving for when it does.
Scenario: the valuation lands under the agreed price
A buyer agrees a price at the start of a long option period and returns to a lender near the exercise date. The valuation is instructed and dated close to settlement, and the lender accepts a value below the price the deed obliges the buyer to pay. The facility is then sized under that lender's policy against the accepted value and security position. The vendor is still entitled to the agreed price. The difference has to come from the buyer, from equity elsewhere, or from another facility written on available security, and it has to be found before settlement rather than after. The buyer who took an early view and watched the market through the option period had months to solve it. The buyer who waited has weeks.
Will your finance approval still be there on the exercise date?
Not automatically, and this is the most common way an optioned purchase comes apart. Approvals and valuations both carry a currency period. A long dated exercise puts a gap between the day the approval was given and the day the money actually has to move.
What usually has to be refreshed and re-verified before settlement is the credit assessment itself, updated financials, and the valuation. Lender policy can change in the meantime. Appetite for the location, the asset type or the borrower's structure can change. The borrower's own position can change, and often does, because a development buyer is rarely standing still while a planning outcome is resolved. An approval taken at the start of an option period and then left alone is a document, not a commitment.
The exercise and settlement dates also have to work operationally. Electronic property settlement is weekday-based and the available financial-settlement window differs by jurisdiction. Have the conveyancer confirm the actual settlement date, public holidays and cut-off before exercise; the national operator publishes its current hours of operation.
An exercise date that falls on a public holiday, at the end of a week, or up against a state cut off time is a solvable problem when it is seen months out, and an expensive one when it is seen the day before. Fast settlement finance covers what is possible when the timetable is already tight, and closing a settlement gap covers the position when the money is short on the day itself.
What actually pays the option fee, and do you get it back?
Cash, or money borrowed against something the buyer already owns. What does not pay it is a mortgage over the land under option, because that land is not yet the buyer's to mortgage.
The field states that a lender will not finance an option fee inside a standard mortgage, and then stops. In practice buyers use their own cash, equity released against property they already own, a second mortgage, or a private facility, and each of those is a separate credit decision assessed on different security and on its own merits. A second mortgage used for site acquisition and a second mortgage sitting behind a stretched senior facility are both structures that turn up on optioned deals, and the timing difference between a caveat loan and development finance is often what decides which one fits.
It also helps to be precise about which payment is which, because an option deed can involve more than one and they behave differently.
| Payment | What it is for | Is it credited to the price | What happens if the option is not exercised |
|---|---|---|---|
| Option fee | The consideration paid to the grantor for the grant of the option itself, which is the right to require the sale. | Only if the deed says so. In Queensland the same wording also decides whether the duty paid on the option is credited at exercise. | Depends on the deed. It is commonly not returned, which is the risk the buyer is knowingly taking on. |
| Security deposit held under the option deed | Held to secure the buyer's performance of the option deed, often by a stakeholder rather than by the vendor. | Depends on the deed. It is usually applied on exercise rather than credited before it. | Depends on the deed and on which party is at fault, which is why the release mechanics are worth reading closely. |
| Contract deposit under the sale contract | The deposit under the contract of sale that comes into existence when the option is exercised. | Yes. It forms part of the purchase price at settlement in the ordinary way. | It does not arise, because no contract of sale has come into existence. |
Whether the option fee is credited toward the price or forfeited if the option is not exercised is a matter of what the deed says. That is a drafting point, not a rule, and it is worth settling before signing rather than after. It also reaches further than most buyers expect: in Queensland, the same wording decides whether the duty paid on the option is credited when the option is exercised, which is covered further down this page.
What sets the option fee, and why no figure appears here
The option fee is negotiated, not calculated, and no percentage, band or rule of thumb is stated here because any figure on this question would be read as what you should expect to pay. What can be set out is the inputs that move it, so the number can be derived in your own deal rather than guessed from someone else's.
| Input | What pushes the fee up | What pushes it down |
|---|---|---|
| Length of the option period | A long period. The grantor is locked out of the market for longer and carries the land through it. | A short period with a defined exercise date the grantor can plan around. |
| Whether the fee is credited to the price | A fee credited to the price. It costs the grantor the use of the money only, not the money. | A fee the grantor keeps regardless. That is real consideration and it is priced as such. |
| Whether extension rights are attached | A built in right to extend. The grantor is selling a longer and less certain lockout. | No extension right, so any extension is negotiated later at the grantor's price. |
| Whether the option can be assigned | A freely assignable option. The grantor loses control of who they end up dealing with. | Assignment restricted, or permitted only with the grantor's consent. |
| The grantor's own tax and cash position | A grantor who wants consideration now. The grant is a capital gains tax event in the income year it is granted regardless. | A grantor who would rather defer, and who prefers the price at settlement to the fee today. |
| What the buyer is asking the grantor to carry | Access for site investigations, planning applications lodged in the grantor's name, anything lodged on title. | A clean lockout with no access, no lodgement and no obligations on the grantor. |
From our broking, indicative
Three things we see on optioned sites, stated as practice rather than as figures. No percentage, band, rate or timeframe appears below, because on this question any number would be read as what you should expect to pay or expect to be able to borrow.
- What a lender is actually looking at during the option period is the quality of the exit, the security available at settlement, and whether the position stands up on the valuation rather than on the agreed price. It is not the option deed itself.
- What gets an optioned site file declined without much discussion is arriving at the exercise date having done the planning work and none of the funding work, and treating a conditional approval taken at the start of the option period as though it were still live at the end of it.
- The sequencing error is the one worth carrying away. The option period is a funding window, not just a planning window. The valuation, the security position and the duty and settlement cash all have to be worked inside it, early enough that a problem found is still a problem that can be solved. Once the put option is exercised, the buyer's choices have narrowed to whatever can be arranged before settlement.
Indicative only, drawn from deals we have placed. It is not a quote, not an offer, and not financial, legal or tax advice. No figure is stated because none can be stated safely on this question. Actual outcomes depend on lender policy, on the deed, and on your circumstances at the time of application.
Could an option fee be characterised as something else?
Yes, depending on the legal substance of the arrangement. Calling a payment an “option fee” does not by itself decide how the payment or the document will be characterised. Repayment rights, a return on the money, security, and obligations that look more like an already-completed sale can all be reasons for a solicitor and accountant to examine the structure rather than rely on the label.
The funding consequence is simple: if the legal character of the payment or the instrument changes, the duty, tax, security and lender analysis can change with it. This page does not state a legal test or say that a particular fee is a loan. Put the actual payment mechanics to the solicitor before the deed is signed.
Does a put and call option affect your other borrowing?
It can, and it is the consequence buyers are caught by most often, because it turns up somewhere they were not looking. Where a put option exists you have a binding obligation to complete a purchase, so every other lender you approach during the option period is assessing an applicant who already carries a committed acquisition.
Think about what the option period actually is for a self-employed buyer. It is a stretch of months or longer in which the business keeps running. A truck needs replacing. A fitout needs funding. A working capital facility comes up for review. A residential loan gets refinanced. None of those applications is about the site, and every one of them lands in front of a lender who asks what commitments and contingent liabilities the applicant carries. A signed put and call option is one.
How much weight any given lender puts on it varies, and there is no single rule to quote here. What does not vary is that the question gets asked, that the answer has to be accurate, and that a commitment discovered late in an unrelated application is far more damaging than one disclosed at the start.
Published guidance is thin on this exact credit question. In the research used for this guide, we did not locate a current Australian regulator or industry-body publication that prescribes how every lender must treat a signed put and call option in a later, unrelated credit application. That does not mean the commitment is ignored. It means treatment is lender-specific, so the option should be disclosed and discussed rather than assumed to sit outside the assessment.
| What changes | Why it changes | What to do about it |
|---|---|---|
| You carry a committed purchase | The put option means completion is not optional. It is a commitment, not a possibility, and it sits in front of any lender assessing you. | Disclose it on every application made during the option period. Treatment varies by lender, but non-disclosure of a known commitment is the problem you cannot fix later. |
| Equity you were counting on may already be spoken for | The option fee and the settlement shortfall are commonly funded against property the buyer already owns, so the same equity cannot also fund the next facility. | Map every use of the same security before signing, not after. Equity is a single pool and the option period draws on it more than once. |
| Your application sequence starts to matter | Applications made after the site facility is assessed sit behind it. Applications made before it can change what the site facility looks like. | Decide the order deliberately. If a piece of business equipment is needed inside the option period, work out where it sits relative to the site approval before either is lodged. |
| Credit enquiries accumulate across the period | A long option period gives more time for unrelated applications, and each one is visible to the lender assessing the settlement facility at the end of it. | Avoid speculative applications during the period. How many credit enquiries is too many covers what accumulates on a file. |
| Your financials have to hold up twice | The credit assessment is refreshed before settlement, so the trading position at the exercise date matters as much as the one at the start. | Treat the option period as a period in which the business's own numbers are under assessment, because at the end of it they are. |
None of this is a reason not to sign an option. It is a reason to know, before signing, what else the business is going to need money for between now and the exercise date, and to raise it as one conversation rather than five unconnected ones. Sequencing site acquisition finance covers the cash timing across the same window.
Can you nominate or assign a put and call option to another purchaser?
Sometimes, but do not treat a nomination, assignment, novation or purchaser substitution as interchangeable paperwork. The deed has to permit the route, the state duty result can change, and if the property will settle in a different SPV, company, trust or joint-venture entity, the lender may have to assess a different borrower, guarantor and security package.
If you already know the entity that should own the land, resolve that structure before signing where possible. Changing it late can turn one decision into three separate workstreams at the same time: the solicitor works out whether the deed permits the change, the revenue authority rules determine whether another duty event is created, and the lender decides whether its existing approval can survive a different purchaser or borrowing structure.
| Change | What it means commercially | What can change for duty | What the lender needs to know |
|---|---|---|---|
| Same purchaser and borrower | No purchaser substitution. The original entity exercises and settles. | The ordinary grant, exercise and transfer rules for that jurisdiction still apply, but there is no added purchaser-change event simply from keeping the same entity. | The borrower, guarantors and proposed security remain the structure originally assessed, subject to normal refresh requirements. |
| Nomination of another purchaser | Another person or entity is nominated to exercise or take the transfer where the deed permits it. | A nomination can itself be treated as a transfer right or deemed transfer. In Victoria, land development between the option and nomination can be especially important; in New South Wales, valuable-consideration nominations are expressly dealt with by the option-transfer rules. | Whether the nominee will now own the land, borrow the money or provide security, and whether the existing approval was issued to the correct entity. |
| Assignment or novation of the option | The original option holder transfers or gives up rights so another party obtains the right to exercise or purchase. | This can be a dutiable transaction in its own right. In New South Wales, where a put option also exists, call option assignment duty can apply to the assignor in addition to duty on the option transfer. | The lender may be looking at a new borrower and a new chain of acquisition documents, so do not assume the first approval follows the option automatically. |
| New SPV or unit trust before exercise | The buyer wants the asset to settle in a newly formed company or trustee rather than the original option holder, often because investors or a JV are being introduced. | The outcome depends on the legal route used and the jurisdiction. Narrow exemptions can exist, but they are not a general rule for every SPV, trust or fundraising structure. | Trust deed, trustee, shareholders or unitholders, guarantees, source of equity and who will actually be the registered proprietor and borrower. |
| Equity or JV partner enters but purchaser stays the same | The legal purchaser may stay put while its ownership, funding or control changes. | It is not automatically the same as assigning the option, but changes in beneficial ownership, trust interests or related transactions can have their own tax and duty consequences. | New source of funds, ownership and control, guarantees, intercreditor or shareholder arrangements, and whether the credit approval needs to be reworked. |
Two current state examples show why the distinction matters. The New South Wales revenue office says a valuable-consideration nomination, novation or other relinquishment that gives another person the right to exercise the option or purchase the land can be treated as a transfer of the option; where a put option is also in place, a separate call option assignment duty regime can apply. See the New South Wales revenue office's current options guidance. Victoria applies its sub-sale rules to transfers resulting from put, call and put-and-call options where a later purchaser obtains the transfer right and additional consideration or land development is involved. See the Victorian State Revenue Office sub-sale guidance.
For funding, the clean rule is simpler: tell the broker and solicitor before you change the purchaser. A lender can assess an SPV or trustee structure, but it needs the actual entity and ownership chain that will borrow and hold the property. The closer the change is to exercise or settlement, the less room there is to solve a duty surprise or redo a credit approval.
Do you pay stamp duty on a put and call option in Australia, and can you pay duty before settlement?
Yes, duty can arise before the land transfers, but the trigger and any later credit differ by jurisdiction. The safest funding assumption is that the deed, the land type, the buyer entity and any assignment or nomination all need to be checked before the buyer treats the option fee as the only cash required before settlement.
The state comparison below uses primary revenue-office or legislation sources current to 3 September 2026. It deliberately does not calculate duty. The point is to identify when another cash event can exist so the solicitor or conveyancer can obtain the actual assessment before the funding is locked.
| Jurisdiction | What the official source says about the option stage | What happens later | Extra trigger to test before signing |
|---|---|---|---|
| New South Wales | From 19 May 2022, the grant of a call option over New South Wales dutiable property is a change in beneficial ownership and ad valorem duty is payable on the consideration for the grant, including GST where applicable. The New South Wales revenue office also says a put option fee does not form part of that consideration. | Duty paid on the grant is not credited against duty on exercise, and the New South Wales revenue office says no refund is issued merely because the call option is never exercised. | Transfer, assignment or nomination can create call option assignment duty where the statutory rules apply. Foreign persons can also face a separate surcharge regime on relevant residential-related transactions. New South Wales revenue office options guidance. |
| Victoria | The current State Revenue Office material reviewed for this page does not state a NSW-style general rule that the mere grant of every land option is charged at grant. It does expressly deal with transfers that result from options under the sub-sale provisions. | A transfer that results from an option can be treated as more than one dutiable transaction where the sub-sale rules apply, including where there is additional consideration or land development. | Nomination, assignment, novation or another arrangement that gives a later purchaser a transfer right, particularly after land development or for additional consideration. State Revenue Office sub-sales guidance. |
| Queensland | The grant of an option to purchase property is treated as the acquisition of a new right. Transfer duty is calculated on the consideration to acquire the option, including contingent consideration described in the agreement. | If the option is exercised, a credit for duty paid on the option is allowed where the option agreement states that the option fee forms part of the consideration for the property transfer. | A transfer of an existing option is itself a dutiable transfer of an existing right. Queensland Revenue Office option toolkit. |
| Western Australia | Western Australia has two different layers. Ordinary option agreements can be assessed under the option-agreement rules. A simultaneous put and call arrangement is dealt with by a separate statutory regime: when it comes into existence, the call option is taken to be an agreement for transfer and can be liable to duty, subject to specific exceptions. | The Western Australian Duties Act provides credit or reduction mechanisms where duty has already been paid on the earlier option transaction and exercise later produces the transfer transaction. | Assignment of a call option in a simultaneous arrangement can itself be taken to be an agreement for transfer. Read the current Commissioner's Practice DA 5 and the Duties Act option provisions. |
| South Australia | RevenueSA publishes separate self-determination guides for an Option to Purchase and an Option to Purchase - Qualifying Land. For residential or primary-production land, the option guide treats the option as chargeable on its consideration; qualifying land has a different reduced-duty treatment under the current land-duty regime. | The answer depends heavily on the land classification and the later conveyance, so there is no safe one-line national credit rule to import from Queensland or Western Australia. | Land classification and foreign ownership. RevenueSA expressly includes an option to purchase in its residential-land foreign ownership surcharge material. Start with the RevenueSA Stamp Duty Document Guide. |
| Tasmania | The current Duties Act 2001 expressly lists an option to purchase dutiable property as dutiable property. | The Act also applies its sub-sale division to put and call options and treats the option as a sale agreement for that purpose when a later person obtains a transfer right. | Assignment, nomination, novation or another transfer-right arrangement can create a separate sub-sale analysis. See the current Tasmanian Duties Act 2001. |
| Australian Capital Territory | The current Duties Act 1999 is in force and its dutiable-property provisions include an option to purchase Australian Capital Territory land, a Crown lease or a declared land sublease. | This page does not state a universal exercise-credit rule for the Australian Capital Territory. The actual deed and later transfer should be assessed under the current Act rather than by copying another jurisdiction's treatment. | Whether the interest is Australian Capital Territory land, Crown lease or declared land sublease, and whether another transaction is being layered over the option. Current Australian Capital Territory Duties Act 1999. |
| Northern Territory | The Stamp Duty Act has a dedicated Division 8AB for options to convey dutiable property. Where both the relevant call and put rights exist, the conveyance of the call option is taken to be a conveyance of the option property and duty is payable accordingly. | The legislation provides a credit mechanism on the later conveyance in the circumstances specified by the Division, and separate rules deal with the position if neither option is exercised. | The simultaneous call-and-put structure itself changes the duty treatment, so do not treat the option fee as the only possible duty base. See the current Northern Territory Stamp Duty Act 1978. |
The useful conclusion is no longer “some states publish nothing”. Every jurisdiction needs its own read. New South Wales, Queensland and Western Australia publish especially detailed option rules; Victoria and Tasmania have option-linked sub-sale regimes; South Australia publishes option document guides; and the Australian Capital Territory and Northern Territory legislation expressly deal with options. That makes the buyer entity, assignment rights and land type funding inputs, not paperwork to clean up at the end.
What about GST on the option fee?
GST is a separate question from duty and it can change both the cash required and, in New South Wales, the amount on which option-grant duty is assessed where GST applies. The broad GST treatment depends on the parties, the property and the deed and belongs with a registered tax agent.
There is one narrow Australian Taxation Office answer worth owning precisely: for the margin-scheme calculation covered by GSTD 2014/2, a call option fee does not form part of the consideration for acquiring the real property when the property is acquired after exercise of the call option, even if the agreement describes the fee as part of the property price. That ruling does not answer whether the original grant is a taxable supply, whether a going-concern treatment applies, whether settlement withholding applies, or the GST outcome for your transaction. Read GSTD 2014/2 with your accountant.
| Question | Why it changes funding cash | Who resolves it |
|---|---|---|
| Is the grant of the option a taxable supply? | It determines whether GST sits on the option transaction itself. | Registered tax agent or accountant. |
| Does GST change the New South Wales duty base? | The New South Wales revenue office states that the call option fee used for grant-duty purposes includes GST where applicable. | Accountant on GST; solicitor or the New South Wales revenue office on duty. |
| Is the margin scheme relevant? | The scheme changes the GST calculation on the later property supply; GSTD 2014/2 gives a specific rule for the call option fee in the acquisition-side margin calculation. | Registered tax agent or accountant. |
| Can the later sale qualify as a going concern? | If relevant, the GST treatment at settlement can be different from the buyer's original assumption. | Registered tax agent, with the legal documents reviewed by the solicitor. |
| Does GST settlement withholding apply? | Where it applies, it changes who receives part of the settlement money and how the settlement statement is funded. | Accountant and conveyancer before exercise. |
How are put and call options treated for capital gains tax?
For the grantor, granting an option is itself a taxing event, and it happens in the income year the option is granted rather than the year the land changes hands. The buyer's position is different, and both belong with a registered tax agent rather than with a broker.
This matters to a buyer even though it is the seller's tax, because it explains vendor behaviour that buyers otherwise find inexplicable, particularly around long option periods and extensions.
| Stage | What happens | What it means in practice for the grantor |
|---|---|---|
| The option is granted | Capital gains tax event D2 happens when a person grants an option, or renews or extends an option they had granted. | The event is the grant itself. No land has moved and no sale proceeds have arrived, and the event has still happened. |
| Which income year it falls in | The capital gain or loss falls in the income year the option is granted, not the year the land is transferred. | A gain can land in a year in which nothing was sold, which is a cashflow timing problem the grantor did not choose. |
| The option is later exercised | The grantor ignores the capital gain or loss made on the grant, renewal or extension, and may have to amend an income tax assessment for an earlier income year. | Administrative work on a closed year, triggered by someone else's decision to exercise. |
| The option is extended or renewed | Renewing or extending an option is itself within the same capital gains tax event as granting one. | Granting an extension is not a free favour. It is a further taxing event, which is part of why extensions get priced. |
Read that sequence from the vendor's chair. Granting a long option can put a capital gain into an income year in which no land has been sold and no sale proceeds have arrived. If the option is later exercised, the gain or loss made on the grant is ignored and an earlier assessment may have to be amended. That is administrative work and cashflow timing the vendor did not choose, and it is a substantial part of why vendors resist long option periods and price extensions the way they do. A buyer who understands it negotiates the exercise date better and reads a refusal more accurately. Who pays to hold a development site before you build covers the buyer's side of the same waiting period.
This is the general position for the grantor only. Individual circumstances change the answer, the buyer's treatment is different, and the look through earnout rules were not read for this page and are not covered by it. Put your own position to a registered tax agent or accountant.
How long should the call option period be, and what happens if approvals run late?
Long enough to finish the planning work and the funding work with room left over, and it is the funding work that gets underestimated. The option period is doing three jobs at once: planning, feasibility and funding.
No standard length is stated here, and you should treat any page that states one with suspicion, because the right period is set by the work that has to fit inside it rather than by convention. What can be set out is the inputs, so the period can be derived from your own transaction.
| Input | What it has to cover | What goes wrong if it is underestimated |
|---|---|---|
| The planning pathway | Lodgement, assessment, requests for further information, and any referral to another authority. | The exercise date arrives with the planning outcome unresolved and the buyer is negotiating an extension from need. |
| The feasibility work | Site investigations, costings and whatever the planning outcome changes about them. | The numbers are still moving when the funding decision has to be made on them. |
| Approval currency | The credit approval has a currency period, and a long option period will outlast it. The assessment is refreshed before settlement. | The buyer holds a lapsed document and believes it is a commitment. |
| Valuation currency and timing | The valuation that sizes the facility is instructed near settlement, so it needs room for a re-instruction if the first one is short. | A shortfall is discovered with weeks left rather than months, and the only remaining answers are expensive ones. |
| Duty and settlement cash | Duty at the grant where it applies, duty at exercise, and the cash required on the day. | Cash that was assumed to be available at settlement was in fact needed at the grant, or needed twice. |
| The settlement day itself | A weekday, clear of public holidays, inside the state cut-off, with the funds able to arrive before it closes. | A technically fundable deal misses the window and becomes a late settlement. |
Buyers usually set the exercise date against a development application or a rezoning timetable, because that is the milestone that decides whether the site is worth acquiring at all. The difficulty is that the same period also has to carry the valuation, the security position, and the duty and settlement cash, and those run in sequence rather than in parallel. The timeline from development application to settlement shows how the two schedules run against each other.
When approvals slip, an extension is negotiated, not assumed. The vendor is under no obligation to grant one. As the previous section explains, the vendor may also have a tax reason to prefer not to, because extending an option is a further capital gains tax event for them. An extension is a commercial ask and the vendor sets its price, which is why the time to negotiate an extension mechanism is at the drafting stage, when the buyer still has something to trade. Funding a development before the build loan starts covers the facilities that can fund the same period.
Scenario: the approval timetable runs past the option period
A buyer takes a call option over a site and sets the exercise date against the development application timetable. The assessment runs longer than expected. The exercise date arrives with the planning outcome unresolved, so the buyer asks the vendor for an extension. The vendor is not obliged to give one, and the vendor's own tax position means the request may cost more than the buyer expects. The buyer is now negotiating from need rather than from choice, and the price of the extension reflects exactly that. What would have changed the outcome is not a better argument on the day. It is a longer period, an extension mechanism negotiated when the deed was drafted, or a funding position that never depended on the approval landing on time.
Can a put and call option be made conditional on finance?
Yes. A finance condition can be written into an option structure, but whether the landowner will accept it is a commercial negotiation and whether it protects the buyer depends on the exact drafting.
A finance condition inside an option deed has to do a specific job to be worth anything. What finance, from whom, by when, on what terms, and what happens if it is not obtained. A condition that does not say those things is worth very little, and strict compliance with whatever it does say is usually required before a buyer can rely on it. That is drafting, and it is your solicitor's work rather than a broker's, which is why no clause wording appears on this page.
What matters here is the trade being made. The buyer is asking for certainty of funding. The vendor is selling certainty of completion, and has usually accepted a price, or a period, that reflects having sold it.
| Approach | What it gives the buyer | Why a vendor resists it | What buyers do instead |
|---|---|---|---|
| A finance condition written into the option deed | A defined way out if funding is not obtained by a stated date, on stated terms. | It reinstates the possibility that the buyer does not complete, which is the exact risk the put option exists to remove. | Do the funding work inside the option period and treat the exercise date as the deadline it already is. |
| A finance condition in the sale contract attached to the deed | The same protection, moved into the document that governs completion. | The same objection. The vendor has usually priced the deal on completion being certain. | Confirm approval and valuation before exercising, rather than relying on a condition afterwards. |
| A longer option period instead of a condition | Time to obtain approval, refresh it, and settle the security position before the exercise date. | The vendor carries the land for longer, and the vendor's own tax position on a long grant is its own reason to resist. | Negotiate the period at the drafting stage, where it costs least and the buyer still has something to trade. |
| A negotiated right to extend the exercise date | A defined path if approvals or funding run late, rather than a request made from need. | It defers the vendor's certainty, and extending is a further taxing event for the vendor, so it is normally priced rather than given. | Ask for the mechanism when the deed is being drafted, not when the exercise date is close. |
| A negotiated right to assign or nominate | An exit that does not depend on the buyer's own funding coming together at all. | The vendor loses control of who they end up completing with, and may want a consent right rather than a free hand. | Negotiate it at drafting. It is the single most useful term a buyer can win, and it carries duty consequences worth understanding first. |
| No condition at all, which is the common outcome | Nothing. The buyer carries the funding risk in full from signing. | There is nothing for the vendor to resist, which is why it is where most deeds land. | Treat the option period as a funding window and solve the valuation, the security position and the cash inside it. |
When a condition is refused, and it usually is, the answer is not to sign and hope. It is to do the funding work inside the option period, early enough that a problem found is still a problem that can be fixed. Buying off market with a short settlement covers the same discipline under a compressed timetable, and penalty interest on a late settlement covers what it costs when a date is missed.
What happens if you cannot fund the purchase when the vendor exercises the put?
If the put option is validly exercisable and the landowner exercises it in accordance with the deed, the buyer can be required to complete the purchase even if the buyer did not exercise the call option. The deed, any notice requirements and the law that applies decide the legal consequence.
If the buyer lets the call option lapse, the put option is the vendor's answer to it. Exercised, it obliges the buyer to complete the purchase on the terms attached to the deed. A failure to fund is then a failure to complete a sale, and what follows, the remedies available and how any loss is measured, is governed by the deed and by the general law. Nothing on this page tells you what a vendor will do, how likely enforcement is, or what it would cost, because those depend entirely on the document and the circumstances.
If you are already in this position, the first call is a solicitor, not a lender. What the deed permits, what notice has been given and what time remains all have to be established before a funding conversation is worth having at all.
What are the actual routes when the funding is not there?
More than one, and they are not all credit. The mistake buyers make at this point is to go straight to a short dated facility, because that is the most visible answer, when it is usually the most expensive one and rarely the first one available. The routes below are ordered the way they should be worked: what the deed and the vendor allow first, then equity, then credit.
| Route | When it is available | What it costs you |
|---|---|---|
| Establish what the deed and the notice actually say | Always, and always first. | A solicitor's time. Everything below depends on the answer, and acting before you have it is how buyers close off routes that were open. |
| Negotiate an extension of the settlement or exercise date | Where the deed provides a mechanism, or where the vendor will agree to one. | Whatever the vendor prices it at, and the vendor is under no obligation to agree. Extending is also a further taxing event for them. |
| Assign the option or nominate another purchaser | Where the deed permits it, and subject to any consent the deed requires. | Duty consequences in some states, including assignment duty charged to the assignor in New South Wales where a put option exists. It is a transaction in its own right. |
| Bring in an equity partner or joint venture | Where the deed permits the entity or the interest to change, and where there is enough time to document it. | A share of the project rather than an interest rate. It also takes longer than buyers expect, which is why it belongs early in the window and not in the last fortnight. |
| Release equity from property you already own | Where you hold other property with available equity and the timing works. | A separate credit decision on separate security, and it uses equity that may be needed later for the build. |
| A short dated facility to reach settlement | Where security is available and the exit is credible. Last, not first. | Short dated money is priced for its term and its risk. It is temporary funding to a defined exit, not a solution to a deal that does not work. See covering a shortfall on the day. |
A caveat blocking settlement deals with the same compressed window from a different starting point, where the obstacle is on title rather than in the funding.
Scenario: the put is exercised before the funding is ready
A buyer treats the option period as planning time. The development application work is done properly and the funding work is left until the exercise date is close. The buyer then discovers that the approval taken at the start has lapsed, that the valuation is not where it needed to be, and that the duty and settlement cash was never separately provided for. The call option is allowed to lapse. The vendor exercises the put, and the obligation to complete is unchanged by any of it. The buyer's options have narrowed to whatever can be arranged before the settlement date, on whatever security is available, at whatever a short dated facility costs. Every one of those problems was visible and solvable inside the option period.
The honest version of this section is that it is a section about prevention. The exposure exists from the moment the deed is signed, and the only reliable answer to it is funding work done early, while the option period still has time in it.
A developer wants an option over your land: what should you settle before you sign?
Settle what happens to your land, your borrowing and your tax during the option period, before you settle the price. Most of the material written on put and call options is written for the buyer, and the landowner is the party signing away control of an asset they may still be using, still borrowing against, and still paying to hold.
This is a live situation for a lot of Australian business owners: the workshop on the corner block, the yard behind the shed, the farm on the town edge, the warehouse in a precinct being rezoned. A developer arrives with a deed and a fee, and the fee is the part everyone looks at. It is rarely the part that matters most.
Does your bank have to consent before you grant a put and call option?
Not in every transaction, but do not assume consent is unnecessary simply because title is not transferring yet. The answer depends on the terms of the existing mortgage and facility documents, what rights the option deed gives the developer, and whether anything can be lodged or protected on title. Granting rights over mortgaged land can therefore create a consent or notification issue before settlement even though the mortgage itself is not being discharged yet.
If the land is mortgaged, have the solicitor check the existing security documents and the proposed option deed before signing. If consent or notification is required, raise it with the existing lender early. If you also expect to refinance, release equity or offer the property as security during the option period, test that plan at the same time: a deed term or title interest that is manageable today can become the reason a later refinance stalls.
| Question to settle | Why it matters to you | Who answers it |
|---|---|---|
| Is the land mortgaged, and is your mortgagee's consent needed? | Granting rights over land that already carries a mortgage can engage terms in that mortgage. It also has to be capable of being discharged at settlement. | Your solicitor, then your lender or broker. |
| Can you still refinance or borrow against the land during the option period? | This is the question landowners miss. If your business needs to refinance or raise money against the property inside the option period, anything registered or lodged against the title changes what a lender will do. | Your solicitor on what the deed permits, your broker on what it does to the borrowing. |
| Can anything be lodged on your title, and on what terms does it come off? | A buyer will often want their interest protected. Whatever is lodged is visible to any lender later assessing the land as security, and removing it is not usually in your sole gift. Settle the removal mechanism, not just whether lodgement is permitted. | Your solicitor on the lodgement and removal, your broker on what it does to the borrowing. |
| Who carries rates, land tax, insurance and maintenance? | You still own the land, so unless the deed says otherwise the holding costs are still yours, for a period you no longer fully control. | Your solicitor on the deed, your accountant on the tax treatment. |
| Can you keep using or leasing the land? | If you trade from it, or lease it out, the deed decides whether that continues and on what terms, and whether any lease has to end before settlement. | Your solicitor. |
| What access and approvals is the developer getting? | Site investigations, planning applications lodged over your land, and works done before you have been paid all change what you are left with if the option is never exercised. | Your solicitor. |
| Can the developer assign the option, and do you get a say? | Without a consent right you can end up completing with a party you never assessed and never agreed to. | Your solicitor. |
| What happens if the option is never exercised? | You get the land back, having been out of the market for the period, possibly with a planning history attached to it that you did not choose. | Your solicitor. |
| What does granting the option do to your tax this income year? | Granting an option is a capital gains tax event in the income year it is granted, whether or not any land has been sold. So is extending it later. | A registered tax agent or accountant. |
The funding point for a landowner is the second row, and it is the one nobody raises. An option period is long. Businesses need money inside long periods. If your plan for the next stretch involves refinancing the property, releasing equity from it, or offering it as security for anything at all, that plan has to be tested against the deed before the deed is signed, not discovered afterwards when a lender asks what is affecting the title. Who pays to hold a development site covers the cost side of the same waiting period from the other direction.
Everything in that table is a solicitor's or an accountant's question, and none of it is answered here. What a broker can tell you is what the answers do to your ability to borrow, which is worth knowing before you decide what the option fee should be.
What happens after the option is exercised?
A contract of sale comes into existence, the purchase settles on the terms attached to the deed, and from that moment you are an ordinary owner of a site with an ordinary set of funding decisions in front of you. The option stops being the thing that shapes the finance, and the project starts.
This matters because the option period trains buyers to think in terms of one deadline. Once it passes, the constraint changes shape. The land is now security, so a mortgage over it is available in a way it never was before. Whatever was borrowed to reach settlement now has to be refinanced or absorbed into the project facility. And the holding costs that were somebody else's problem during the option period are now yours.
| Step | What changes | The funding question it raises |
|---|---|---|
| Exercise | A contract of sale comes into existence on the terms already attached to the deed. | Is the approval current, is the valuation current, and is the settlement cash including duty actually in place. |
| Settlement | Title transfers. The facility draws. You now own the land. | Whether the facility that got you here is the facility you want to hold, or a temporary step to something else. |
| Holding the site | Rates, land tax, insurance, interest and any remaining planning work are now yours to carry. | How the holding period is funded and for how long, and whether the facility that reached settlement is the one that should carry it. |
| Getting to a build ready position | Approvals finalised, conditions cleared, costings locked, builder appointed. | What funds the gap between owning the land and drawing a construction facility. Funding before the build loan starts. |
| Construction | The facility moves to a staged structure drawn against progress rather than against the land alone. | What the lender is solving for on the project numbers. The three numbers that decide an approval. |
The buyer who does the funding work inside the option period arrives at this table with a plan for all five rows. The buyer who does not arrives at row two with nothing beyond it, having spent everything available to reach settlement and with the project still to fund. That is the reason the option period is a funding window rather than a planning one, and it is the whole argument of this page in a sentence.
A put and call option makes a land transaction binding on both sides before a contract of sale exists, and that is exactly what makes the funding different. No standard mortgage is available over land the buyer does not yet own, so the work moves inside the option period: approval that will still be current at exercise, a valuation the facility can be sized on, an option fee funded from cash or other security, duty and settlement cash provided for according to the state the land is in, and an honest look at what the commitment does to every other loan the business needs in the meantime. The put option is what makes all of that non-optional, because letting the call option lapse does not release the buyer. If you are the landowner being offered one, the questions that decide your position are mortgagee consent, whether you can still borrow against the land, and who carries the holding costs, none of which is the option fee.
Key takeaway: the option period is a funding window, not just a planning window, and every problem worth finding is cheaper to find inside it.Frequently Asked Questions
A put and call option combines two rights over the same property. The call gives the buyer a right to require the owner to sell; the put gives the owner a right to require the buyer to purchase. Under the usual structure, valid exercise brings the sale contract into effect. The deed, any cooling-off rights and its conditions decide exactly when the buyer becomes committed.
It is an agreement over a specific parcel of land that sets the price or pricing mechanism, option periods and the sale terms that will apply if the option is exercised. Before settlement the buyer has rights under the deed rather than registered title, which is why the finance work happens during the option period rather than through an ordinary mortgage draw against the site.
It means two rights that sit together over the same asset. One party can require the other to buy, the other can require the first to sell, and between them the two rights make the transaction certain before a sale has happened. Over land in Australia it means a specific thing: an agreement, usually a deed, under which the buyer can call for a transfer and the owner can put the land to the buyer if the buyer does not. It does not mean the sharemarket instrument of the same name.
An option in real estate gives one party the right to require a sale of a specific parcel of land, on price terms already agreed, within a period already agreed. The buyer pays an option fee for that right. Nothing is sold when the option is granted and the buyer holds rights under the deed rather than registered title, which is why a lender cannot take an ordinary mortgage over that land at that point. Valid exercise brings a contract of sale into effect and settlement follows. Where a put option is attached as well, the owner can require the sale to complete even if the buyer does not exercise.
They share the words and nothing else. A sharemarket put and call option is a traded derivative over a financial product, bought and sold on an exchange, with a premium, a strike price and an expiry. A property put and call option is a private agreement over a specific parcel of land, usually written as a deed, with an option fee, defined option periods and sale terms attached to it. Transfer duty and land title law apply to the property version and not to the sharemarket one. Everything on this page is about land.
Yes, the future acquisition can be assessed, but a normal purchase mortgage cannot simply draw against land the buyer does not yet own. The lender can assess the borrower and deed, value the security, confirm the borrower contribution and document a facility to draw at settlement when title and lender security can be established.
Start with the complete option deed and annexed sale contract, the borrower and entity structure, current financial evidence, existing debt and security, the source of the option fee and settlement contribution, property and valuation information, planning or feasibility material where relevant, the duty and tax cash position, and the exit or construction plan. The exact pack varies by lender.
It can. A put and call option can represent a committed future acquisition and can also use equity or cash that might otherwise support another facility. Treatment varies by lender, so disclose the option when applying for equipment, working capital, property or other finance during the option period and sequence those applications deliberately.
You can, before settlement, and the answer differs by jurisdiction. New South Wales, Queensland, Western Australia, South Australia, Tasmania, the Australian Capital Territory and the Northern Territory all have official option-related duty material, while Victoria has option-linked sub-sale rules. The deed, land type, buyer entity and any assignment or nomination need a jurisdiction-specific duty review.
For residential property, New South Wales now applies the option cooling-off regime to both options to purchase and options to compel purchase, subject to statutory exceptions. The period generally ends at 5pm on the fifth business day after grant. A contract formed by exercising the option does not get a fresh cooling-off period. Have the deed checked by a solicitor or conveyancer.
For the grantor, granting, renewing or extending an option can trigger CGT event D2. If the option is later exercised, the grant-related gain or loss is disregarded and an earlier assessment may need amendment. The buyer and grantor can have different tax consequences, so the actual deed and circumstances belong with a registered tax agent.
Ask what happens to your mortgage and ability to refinance, whether anything can be lodged on title and how it is removed, who carries rates, land tax, insurance and maintenance, whether you can keep using or leasing the land, what access the developer receives, whether assignment is allowed, what happens if the option lapses, and what the grant does to your tax position.
It is the same pair of matched rights applied to a business or asset sale rather than to land. One party can require the other to buy, the other can require the first to sell, and together they make the transfer certain on an agreed date or trigger. The land version is the one covered on this page, and the funding, valuation and duty questions set out here are specific to land rather than to a business sale.
The benefit of a call option can sometimes be assigned or another purchaser nominated, but the deed decides whether that is allowed and on what terms. Assignment or nomination can also create duty consequences and may change the borrower or lender structure, so resolve the legal and funding effect before relying on it as an exit.
There is no single standard period that is safe to quote. The period has to fit the planning and feasibility work plus the funding work: credit assessment, valuation, security, duty, settlement contribution and enough time to solve a shortfall. Build the period from those tasks rather than choosing a conventional number.
If the put is validly exercisable and exercised under the deed, the buyer can be required to complete. The first step is to have a solicitor establish what the deed and notice require and what time remains. Depending on the deed, possible routes can include an extension, assignment or nomination, an equity partner, other-property equity or a short-dated facility. Credit is not automatically the first or best route.
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