New South Wales Budget: Stamp Duty Changes

On Tuesday 6 June the Duties Amendment (Abolition of State Taxes) Bill 2006 was introduced into the New South Wales Parliament.

As the name suggests it deals with, amongst other things, the abolition of certain heads of duty, as announced by the Government a few weeks ago. While there are no surprises here, we can now see the all-important transitional provisions.

Some points to note:

Hire of goods duty is to be abolished from 1 July 2007. If the lessor is a commercial hirer it need not pay duty past this date. If the lessor is not a commercial hirer liability will still arise to a one off payment of duty so long as the first or only payment of hiring charges is made or becomes payable before 1 July 2007.

Lease duty (at 0.35%) is to be abolished from 1 January 2008. Lease duty will therefore only be payable on leases executed before that date. Variations entered into on or after that date are ignored. If a lease executed before 1 January 2008 has any unascertainable cost components then on the first estimate (or upstamping) date after 1 January 2008 a final estimate of the cost of the lease is to be made and final duty paid on that amount.

Note that after 1 January 2008 transfer duty will still be payable on any premium for the grant of a lease. From 1 July 2006 this premium amount will be deemed to include any premium paid for an option to take a lease. Also from 1 July 2006 there will be no refund of duty where a lease is terminated early but the lessee or an associated person has or will occupy the premises after that time (other than where the lessee or the associated person has bought the premises).

There are no anti-avoidance provisions aimed at a lease drafted to expire on or just after 1 January 2008 and coupled with an option to extend the term from that time.

Transfer of unquoted marketable securities (at 0.6%) is to be abolished for agreements for sale/transfers etc executed on or after 1 January 2009. This abolition has no effect on land-rich duty.

Transfer duty on goodwill, IP, statutory licences and poker machine entitlements (top rate 5.5%) is to be abolished for agreements for sale/transfers etc executed on or after 1 July 2012.

There is an anti-avoidance provision preventing replacement transactions or the use of options or other arrangements intended to ensure that the agreement for sale post-dates 30 June 2012.

Transfer duty is not abolished in respect of land, transferable floor space, land use entitlements, partnership interests for partnerships holding other dutiable property, goods (other than stock in trade) sold with other dutiable property and options to purchase land.

Mortgage duty is to be abolished from 1 January 2011 for mortgages executed on or after that date. Further advances made after that date are not dutiable. The rate of mortgage duty is to be halved for mortgages executed in 2010.

Various amendments have been made to mortgage duty (effective 1 July 2006) to protect the revenue in the period leading up to 1 January 2011. From 1 January 2009 New South Wales will be the only State levying mortgage duty.

• New South Wales has followed Queensland and Western Australia and included a section to catch future property mortgages where the property is identified in the mortgage or under an arrangement in place at the time of execution. This provision does not extend to quoted marketable securities or units in a unit trust scheme issued to the public and where 50 or more persons are beneficially entitled to units. This exclusion seems intended to assist the margin lending industry.
• The old distinction between limited and unlimited securities has been reinstated.
• Property outside Australia is no longer to be excluded from the calculation of the proportion of mortgaged assets in New South Wales.
• A mortgage package must be signed up within a 28 day period.
• Where a package consists of securities which are limited insofar as they affect New South Wales property, duty is to be calculated on the lesser of the New South Wales proportion of all advances secured by the package and the amount of the New South Wales limit. Where any of the other securities are all moneys securities, "all advances secured" would mean the total of all advances.
• Where a mortgage is presented in New South Wales for collateral stamping, and the "primary security" was stamped with duty at a reduced rate in another State, the mortgage is not to be stamped with $10 but is to be included in a new mortgage package and duty assessed on a proportional basis. Liability is capped to the amount of duty payable on the security at the New South Wales rate without taking into account the fact the mortgage is collateral.