Ad valorem is a Latin term meaning, “according to value”. This is a phrase is used in reference of the method for levying duties (i.e. tax) on a transaction or property, which is payable based proportionally on the value of the transaction or property, rather than on its quantity.
The most common example of the calculation of duty on an ad valorem basis is the transfer of land or business duty (formerly known as stamp duty in NSW). The duty on a sale or transfer of land is paid in accordance with the rates published by Revenue NSW. According to the value of the purchased or transferred land, vendors will have to pay an amount upfront plus a percentage of every $100 of the value of the land that exceeds a nominated threshold.
Ad valorem taxes or payments can also take the form of a tax on personal property, such as a motor vehicle tax.