31 October 2005
Key Points:
There are some recent developments in the stamp duty legislation which developers and investors should be aware of.
The past year has seen some major changes in the stamp duty legislation. Several new taxes were introduced in New South Wales (and some of these have already been abolished!). While other States such as Queensland, Victoria, Tasmania and South Australia made the news for announcing the abolition of certain (but not all) stamp duties after the Federal Treasurer Peter Costello made demands of all States to abolish stamp duties under the Inter-Governmental Agreement. Western Australia and New South Wales are still standing their ground.
Vendor duty
Vendor duty was unique to New South Wales. This unpopular duty lasted less than 18 months. It was introduced on 1 June 2004 and abolished from 2 August 2005. Vendors were required to pay vendor duty of 2.25 percent of the dutiable value of their New South Wales land when they sold it. This duty was additional to the up to 5.5 percent transfer duty paid by the purchaser of the land. The introduction of vendor duty meant duty of up to 7.75 percent could be paid in New South Wales on some land transactions.
Vendor land rich duty
Land rich disposal duty or vendor land rich duty lasted less than 12 months. It came into effect on 10 November 2004 and was similarly abolished on 2 August 2005. Again, it was unique to New South Wales. The effect of the land rich disposal duty provisions was that disposals as low as a 1 percent interest in a private company, private unit trust or wholesale unit trust scheme could be dutiable at 2.25 percent by reference to the New South Wales land owned by the entity and the interest being transferred.
Duty on the assignment of a right under a call option to purchase dutiable property
New South Wales has introduced provisions which impose duty on the transfer of put and call options. These new provisions came into effect on 1 July 2005. They provide that where a call option over dutiable property is assigned, and there is also a put option in existence in relation to that dutiable property, then the assignment of the call option will be liable to duty as if it were an agreement for the sale or transfer of the underlying property that was the subject of that option. Duty will be payable at transfer duty rates of up to 5.5 percent on the greater of, the sum of the consideration for the assignment of the call option and the consideration payable if the call option is exercised, and the market value of the dutiable property.
The exemptions available are quite limited in that they relate to the obtaining of finance or to facilitate the continuation of the business by continuing proprietors. They require the Commissioner to exercise his discretion.
New Part 4A - transactions treated as sub-sales - Victoria
As of 29 June 2005, new provisions dealing with transactions treated as sub-sales of land, have come into effect in Victoria. The new provisions are substantially different from the old provisions. Therefore care must be exercised when entering into new transactions dealing with land in Victoria.
Previously, if a vendor entered into a contract for the sale of land with one person but executed the instrument for the transfer of land in favour of another person (usually because the purchaser has made a nomination), the transfer was liable for duty as two transactions unless an exception applied.
Under the new provisions, transfers involving additional consideration, land development or transfers resulting from options may be treated as two or more separate transactions with duty being payable on each transaction. The aim of the new provisions is to impose duty on commercial arrangements which through novation, nomination, assignment or otherwise, effect a sub-sale of the land by the person with whom the vendor has a contract or option arrangement.
Although exemptions and concessions are available, the Commissioner's approach to applying these exemptions and concessions is yet to be tested.
