Real estate 5 Minute Fix 20: stamp duty and revenue, land tax, e-conveyancing, and mortgagee protections

The Real Estate Team
12 Dec 2022
Time to read: 5 minutes

Get your 5 Minute Fix of real estate news. This issue: stamp duty and revenue; land tax; e-conveyancing; planning system updates; mortgagee protections

ACT: New Planning System open for consultation

The new ACT Territory Plan and a series of District Planning Strategies are now open for consultation as part of the ACT Government’s Planning System Review and Reform Project.

The new plan and strategies are intended to be easier to use and provide greater flexibility as to how developments may be designed, including a focus on diversity, quality, construction and built outcomes. Key changes to the existing Territory Plan include changes to land uses, building heights and setbacks.

Consultation is open until 14 February 2023.

ACT: Minimum energy efficiency standards for rental properties

The ACT Government has passed a regulation under the Residential Tenancies Act 1997 (ACT), to introduce new minimum energy efficiency standards for rental properties.

The standards specify the minimum requirements for ceiling insultation and will commence on 1 April 2023, introduced in three phases:

  • From 1 April 2023: All rental providers must indicate whether their property meets the minimum standards in any rental advertisements or lease agreements.
  • A phase in period between 1 April 2023-1 December 2026: All properties must comply with the minimum standard within 9 months after signing a new lease. If no new lease is signed, then the property must comply with the standards by 1 December 2026.
  • From 1 December 2026: All properties entering the rental market must comply within the minimum standard within 3 months from the date a new lease is signed.

ACT: Proposed end of no cause evictions

The Residential Tenancies Legislation Amendment Bill 2022 was introduced to the ACT legislative assembly on 30 November 2022.

The Bill proposes to end no cause evictions in the ACT and introduce a new ‘with cause’ termination requirement to support landlords with property management.

Additional proposed changes include amendments to restrict solicited rent bidding, permitting tenants greater freedom to grow food and compost, and to introduce a framework to support minimum housing standards for rental properties.

The Bill remains before the Legislative Assembly.

ACT: Proposed updates to ACT Revenue legislation

The Revenue Legislation Amendment Bill 2022 (ACT) was introduced to the ACT Legislative Assembly on 1 December 2022.

The Bill amends the Duties Act 1999 (ACT) and Land Tax Act 2004 as part of a suite of updates to the landlord duties provisions intended to simply and modernise the drafting and bring the ACT's landholder duty regime closer in alignment with the other States and Territories.

The key proposed changes include:

  • clarifying how duty is imposed on a “relevant acquisition” in a “landholder” including the removal of unnecessary references to acquisition statements;
  • amending the application of joint and several liability provisions for landholder duty to include the landlord and trustee for a private unit trust scheme;
  • confirm that “landholding” under an agreement for sale of land includes the grant of a Crown lease;
  • amending the construction ownership provisions of “linked bodies” and consolidating the definition of “complying superannuation fund” to align with other jurisdictions and remove superseded references; and
  • to amend the definition of “associated person” to reduce the potential to use interposed entities to reduce landholdings against the intent of the provisions.

The Bill remains before the Legislative Assembly.

NSW: Landlords hosting electricity transmission lines to benefit from payment scheme

Private landowners in regional NSW who host electricity transmission lines will now be eligible to receive payments under the NSW Government Strategic Benefits Payments Scheme which is aimed at supporting growth in renewables under the NSW Electricity Infrastructure Roadmap.

The details of the Scheme are set out below.

  • Payments of $200,000 per kilometre of new transmission infrastructure will be paid by the transmission operator in annual instalments over 20 years and indexed to CPI.
  • Payments are to be calculated consistently across the state, with no variations based on location of land.
  • The Scheme applies to all new major transmission projects with a voltage of at least 330 kV or to the increasing of voltage on existing lines that will involve substantial new works. Current projects subject to the Scheme include Project EnergyConnect, HumeLink, Central-West Orana REZ Transmission Project, the New England Transmission Project and the Hunter Transmission Project.
  • Payments under the Scheme are in addition to compensation payable to landowners under the Land Acquisition (Just Terms Compensation) Act 1991 (NSW) for the acquisition of transmission easements.
  • Where the relevant land is sold within 20 years, the payments will continue to be paid to the new landowner, provided they are a private landowner.

NSW: New Commissioner’s Practice Notes for stamp duty changes: Change in beneficial ownership (CPN 025) and Leases and change in beneficial ownership (CPN 027)

With complex stamp duty reforms under the Duties Act 1997 (NSW) introduced as of 19 May 2022, Commissioner’s Practice Notes (CPNs) in respect of changes in beneficial ownership (CPN 025) and lease specific changes in beneficial ownership (CPN 027) have now been released.

The Duties Act now sees duty chargeable on transactions that result in a change in beneficial ownership of dutiable property, in addition to transfers and other dealings. This means the grant of an option, grant of an easement for consideration and the grant, renewal or variation of a lease for consideration are all dutiable transactions.

The CPNs come as much-anticipated guides to the significant reforms in respect of their application to leasing transactions. Clients and legal practitioners are now on high alert to the duty implications with particular concern on what may be captured by the phrase “change in beneficial ownership”. While the CPNs offer guidance, the nuances of particular transactions require close analysis when considering duty.

NSW: Beware: penalties skyrocket under the Building and Other Fair Trading Legislation Amendment Act 2022

Significant increases in penalties under the Building and Other Fair Trading Legislation Amendment Act 2022 (NSW) for non-compliance with completion notice requirements under the Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020 (NSW) were introduced on 14 November 2022.

Under section 7 of the Act, developers of residential apartments must provide an expected completion notice to the Secretary of the NSW Department of Customer Service before any application for an occupation certificate is made in relation to any part of a residential apartment building for which the relevant building work is or was carried out.

Non-compliance with section 7 of the Act may result in a maximum penalty of 3,000 penalty units for a body corporate (plus 300 penalty units per day in the event of a continuing offence) or 1000 penalty units otherwise (plus 100 units per day for a continuing offence). The Regulations currently set the amount payable as $11,000 (body corporates) and $3,000 (individuals), a significant increase from the previous 1000 and 200 penalty units respectively, under the Act.

NSW: NSW Government undertakes review of the Retail Leases Act 1994 (NSW)

The NSW Government is undertaking a review of the Retail Leases Act 1994 (NSW), with submissions and input open until 9 December 2022. NSW Small Business Commissioner Chris Lamont will conduct the review.

The review will be broad in scope, focusing on whether the Act continues to meet policy objectives and whether those objectives remain relevant. Minister for Small Business, Victor Dominello, has indicated that the key objectives of the review are “cutting red tape, improving certainty and reducing administrative costs”. The review is likely to consider issues such as the definition of “retail” under the Act, how the Act may simplify interstate business, registration requirements and timeframes and identification of measures to promote energy efficient upgrades in retail leases.

The review may have implications for wider commercial transactions as it will also contemplate how the Act interacts with the Conveyancing Act 1919 (NSW) and the Strata Schemes Management Act 2015 (NSW).

The outcomes of the review are expected to be published in July 2023. More information can be found in the Discussion Paper.

NT: Bill introduced to facilitate electronic conveyancing

The Land Legislation Amendment Bill 2022 was introduced on 30 November 2022 to amend the Electronic Conveyancing (National Uniform Legislation Act 2013, Land Title Act 2000, the Law of Property Act 2000, Electronic Conveyancing (National Uniform Legislation) Act 2013 and other land-related legislation necessary for the purposes of accommodating electronic lodgements and conveyancing.

The Bill also amends the Law of Property Act 2000 to clarify that a mortgagee may exercise a power of sale following disclaimer without the need to apply for a court order under Commonwealth law.

The Bill remains before the Legislative Assembly.

Qld: Commercial buyer beware: Queensland Court of Appeal considers landlord liability lease defaults inherited from seller and possible set-off risks

In Bank of Queensland Limited v Y & L Promising Pty Ltd [2022] QCA 217, the Queensland Court of Appeal considered whether a new landlord was liable for a debt incurred by a previous landlord under the lease for costs associated with asbestos remediation allegedly owed to the tenant.

The tenant argued that section 62 of the Land Title Act 1994 made the new landlord liable for prior breaches because that section provides that “liability… in relation to a lot” vested in the landlord when it was transferred the Property. The Court rejected the tenant’s argument on the grounds that:

  • section 62 only vests liabilities “in relation to a lot”, which are liabilities that are sufficiently intimate or incidental to the present and future ownership of the land; and
  • the tenant’s contractual right to enforce a debt in this instance was a personal right that was not sufficiently “in relation to the lot” to be vested in the Landlord under section 62.

Interestingly, the Court considered the tenant might have better prospects under section 62 if it were seeking to enforce its contractual right to set off the debt against future rent under the lease (a current and accruing liability) rather than its right to pursue a debt against the landlord for breach (a completed liability). This point has been remitted back to the District Court for re-pleading and determination.

Although the Court ultimately found that the landlord was not liable for prior breaches of the lease in this instance, the decision reminds purchasers of tenanted commercial property to clearly understand the terms of the leases they are agreeing to take on and to ensure their purchase arrangements provide that they are not taking on retrospective liabilities under the lease.

Qld: Housing Legislation Amendment Bill 2022 (Qld)

The Housing Legislation Amendment Bill 2022 (Qld) was introduced on 27 October 2022. The Bill proposes to amend the Housing Act 2003 (Qld), Housing Regulation 2015 (Qld) by introducing a “Homes for Homes” donation deed model. A similar model exists in other jurisdictions.

The voluntary model provides for landowners and property developers to make a tax-deductible donation of 0.1% of the sale price of their property at the time of sale.

It is proposed that participants will enter into a donation deed with Homes for Homes Limited (an independent, not-for-profit social enterprise established by The Big Issue) and an administrative advice will be recorded on the title of the property that will remain on title until removed. The purpose of the administrative advice is to remind landowners of their agreement to donate a portion of the sale price to Homes for Homes Limited.

The Bill also proposes amendments to the Retirement Villages Act 1999 (Qld) to enhance financial transparency of the operation of retirement villages.

The Bill has not yet been passed, with the Committee due to table its report on 16 December 2022.

Qld: Land tax reforms shelved

The land tax reforms detailed in the September edition of the 5 Minute Fix have been shelved by the Queensland Government.

Qld: Queensland mandates electronic conveyancing from 20 February 2023

In accordance with section 5 of the Land Title Regulation 2022 certain instruments from 20 February 2023 must be lodged electronically, unless an exemption applies.

The instruments that must be lodged electronically include:

  • transfer documents;
  • mortgages;
  • releases of mortgage;
  • caveats;
  • withdrawals of caveat; and
  • priority notices.

Section 5(2) of the Land Title Regulation 2022 provides the list of relevant exemptions from the above requirement, which includes:

  • where the Electronic Lodgment Network does not have the functionality to prepare, lodge or deposit the required instrument;
  • where, outside of the lodger’s control, the Electronic Lodgment Network prevents the lodgement or deposit of the required instrument;
  • where the required instrument is required to be prepared, lodged or deposited with another instrument or document that cannot be lodged or deposited using an Electronic Lodgment Network; or
  • where a self-represented party is an individual who is not a subscriber to an Electronic Lodgment Network.

Vic: Draft rulings released for Land Tax exemption on Primary Production Land

The State Revenue Office has released two draft rulings on land tax exemptions for Primary Production Land under the Land Tax Act 2005. These rulings set out the Commissioner’s view about the key elements and conditions to be met in order to qualify for an exemption from land tax for primary production land.

The first draft ruling deals with exemptions for primary production land located outside greater Melbourne and used primarily for primary production (section 65 of the Act) and primary production land in greater Melbourne but not in an Urban Zone (section 66 of the Act). It also seeks to provide guidance on the definition of “primary production” and other key concepts in section 64 of the Act. The second draft ruling explores the exemption for land located wholly or partially in greater Melbourne and wholly or partly within an Urban Zone that is used solely or primarily for the business of primary production (section 67 of the Act).

First Draft Revenue Ruling LTA-010:

The draft Ruling seeks to clarify the definition of primary production for the purpose of the Act in a number of ways, but importantly, primary production consisting of:

  • Cultivation for the purpose of selling the produce of cultivation (whether in a natural, processed or converted state) covers the whole process of production (and is not just limited to annual crops or crops with periodical production). It does not necessarily require the breaking up of the soil. As a result, irrigation, fertilisation, insect control and construction of protective wind breaks on the land can all be cultivation of land. These same principles apply to land used for timber production and hydroponic crop methods.
  • Maintenance of animals or poultry for the purpose of selling them or their natural increase or bodily produce excludes maintenance of wild animals and animals kept for recreational purposes but includes the provision of food, water and shelter on land to keep the animals/poultry alive provided the animals/poultry are owned and possessed by the person claiming to be the primary producer (who does not have to be the owner of the land).
  • Bee keeping for the purpose of selling honey will be indicated by factors including the number of hives kept, the quantity of honey sold, the duration that the hives have been kept, the area of land containing buildings and equipment used in the course of maintaining the bees and producing honey and whether the land and surrounding areas contain suitable flora and watering points necessary for a bee’s production of honey. Land containing suitable foraging areas for bees may not be eligible for the exemption if there is not adequate evidence to demonstrate active cultivation and maintenance of the trees and vegetation for a bee keeping operation.
  • Commercial fishing, including the preparation for commercial fishing or the storage or preservation of fish or fishing gear includes preparation or storage of nets, boats and/or other fishing equipment, preparation of bait, or storage/preservation of fish that have been caught. Compliance with the requirements of the Fisheries Act 1995 for such an enterprise is a strong indicative factor.
  • Cultivation or propagation of plants, seedlings, mushrooms or orchids for sale includes the growing of new plants, seedlings, mushrooms or orchids and breeding as part of early cultivation of plants using seeds, cuttings or spores. It may be conducted in soil, in pots or in a temperature-controlled facility. It does not include sale only without cultivation or propagation.

The draft ruling also expands the following concepts and terms:

  • “secondary production”, being the act of converting the primary produce into a derivative item, will not be eligible for the exemption, except where the secondary production occurs on the same land as the primary production and the primary production is the primary use of the land;
  • the “purpose of selling”, which cannot be merely incidental to another purpose and the primary production itself must have occurred on the land. Maintaining animals or crops for recreational or personal benefit (including as a form of maintenance of the land and/or weed management) or as a hobby do not amount to primary production;
  • “use primarily for primary production”, which is key to the exemption and can mean actual and physical use, but also inactivity deliberately adopted as a means of gaining advantage from the land. It also requires a weighing of several factors including the area of the land over which the use extends, the intensity of the activities and the comparative time and labour devoted to those activities; and
  • a period of up to 6 months before and after 31 December prior to the relevant land tax year as being considered a reasonable period for determining whether the exemption applies.

Additionally, the draft ruling has clarified that the onus of proof for obtaining an exemption rests with the owner of the land, even if another person is using that land.

Second Draft Revenue Ruling LTA-011:

The second draft ruling seeks to provide more clarity on the requirements for a land tax exemption under section 67 of the Act, including by providing that:

  • the primary production activity on the land must be undertaken solely or primarily for the business of primary production by the landowner;
  • relevant indicators as to whether a business is being undertaking on the land include whether the activity has a “significant commercial character”, reputation and regularity of the activity, whether the landowner has a purpose of profit as well as a prospect of profit or whether the activity is better described as a hobby or form of recreation or sporting activity. An intention to carry on a business is insufficient if there is no activity actually being undertaken.
  • where losses have been incurred, the taxpayer must demonstrate the presence of other indicators of a business in sufficient strength as well as a prospect of profit-making;
  • land used solely or primarily for agistment is ineligible for the primary production exemption;

The draft ruling also:

  • provides clarity regarding the ownership requirements that must be met in order to qualify for a section 67 exemption including that a corporate owner must not be a trustee and must have shares that are beneficially owned by natural persons;
  • includes as a common concept in all ownership requirements that a person linked to the owner is “normally engaged in a substantially full-time capacity” in the business of primary production (which will be generally assessed by comparing the time spent by that person on the business against that person’s other endeavours and leisure engagements; and
  • requires the business of primary production, in most cases, to be the principal (or most important) business of the owner.

As these are draft rulings, they should not be relied upon until finalised. However, once confirmed, these rulings will create greater confidence and certainty in the application of a primary production exemption for land tax.

Vic: Jumping the gun? Release of deposits in Victorian real estate transactions

Those entering into real estate contracts should be wary that Courts will likely strike down contractual provisions that seek to alter legislative requirements governing the early release of deposits.

The Victorian Supreme Court case of GLP Batesford Holdings Pty Ltd v 68 Bridge Road Land Pty Ltd was the first case to consider if a contractual provision requiring the early release of a deposit was in contravention of statutory provisions in Victoria.

The contractual provision in question required the purchaser to “sign, date and return any statement given under section 27 of the Sale of Land Act which complies with General Condition 12(a)". It also imposed a time limit of 5 business days for return of the notice.

In Victoria, early release of deposits is governed by section 27 of the Sale of Land Act 1962 (Vic) which, in particular circumstances, enables a vendor to provide specified information to a purchaser, and for the purchaser to indicate within 28 days whether the information is satisfactory. Only if a purchaser is satisfied with the information provided may a deposit be released before settlement.

The vendor issued a statement which purported to comply with section 27. Within five business days after receipt, the purchaser issued a statement advising the vendor that it was not satisfied with the information provided. The vendor subsequently issued a rescission notice, advising that the purchaser was in default under the contract and requiring the purchaser to authorise release of the deposit, failing which the vendor would rescind the contract of sale.

Justice Riordan held that the contractual provision could not operate in the absence of the purchaser’s satisfaction of the particulars provided, and in any event not before the statutory 28-day period. The purchaser had indicated that it was not satisfied with the particulars provided by the vendor, and therefore the contractual provision did not become operative. Accordingly, the rescission notice served by the vendor based on an alleged breach of the contractual provision was invalid.

The vendor has appealed the decision and we await the outcome of the appeal. In the meantime, it should be noted that inventive drafting seeking to alter legislative provisions governing the release of deposits in Victoria will likely be struck down. Drafters must ensure that all substantive rights and protections conferred on purchasers under statute remain intact.

WA: Land Tax exemption for homeowners who have moved into full time care

The Land Tax Assessment Amendment Bill 2022 (WA), now the Land Tax Assessment Amendment Act 2022 (WA) (the Amending Act), has just recently been passed by the WA Parliament to introduce a land tax exemption for homeowners who have moved into full-time care.

The Amending Act inserts section 26B in the Land Tax Assessment Act 2022 (WA) that exempts private property owned by an individual in full-time care from an assessment year such that the property will not be subject to land tax under the Land Tax Assessment Act 2022 (the Principal Act). Given that the Principal Act already generally exempts private residential property being used as a primary residence from land tax, this amendment has been described as a ‘common sense’ change to the legislative scheme.

Section 26B(2) of the Principal Act lists circumstances in which an individual would be considered to be in “full-time care” including where an individual’s primary residence is a hospital, a mental health service facility or an aged care facility. The purpose of the introduction of this exemption is to assist vulnerable members of the WA community by reducing their financial pressures in what will likely be a difficult transition period.

However, according to section 26B(5)(a) of the Principal Act, this land tax exemption will not apply if any income is derived from the property by the individual or any other persons. Therefore, property being used as a rental property of any kind will not be eligible for this exemption.

This exemption to assist the more vulnerable will be retrospectively applied and deemed to have come into operation on 1 July 2020.

WA: Landgate to abolish paper Duplicate Certificate of Titles

From August 2023, Landgate will abolish Duplicate Certificates of Title from Western Australia’s land titling system. Duplicate Titles are paper versions of the original, digital title. Once this is implemented, Duplicate Titles will not be created or issued, and importantly, Duplicate Titles will not be required when a dealing is registered at Landgate. This is one of the changes made by the Transfer of Land Amendment Act 2022 (WA), which amends the Transfer of Land Act 1893 (WA).

It should be noted that, from this time, existing Duplicate Titles will not need to be returned to Landgate or destroyed or rendered invalid.

This change will streamline the conveyancing process in Western Australia, and support efforts towards the ongoing advancement of electronic conveyancing within Western Australia.

WA: Mortgagees have reason to be wary of a mortgagor going into liquidation, but they can at least be confident their legal interest is protected

The Federal Court recently affirmed the ability of a mortgagee to exercise its power of sale under s 108 of the Transfer of Land Act 1893 (WA) in circumstances where the registered proprietor went into liquidation and the liquidator attempted to disclaim the property and the "mortgage agreement".

In the case, N1 Investments Pty Ltd (N1) was the registered proprietor of real property in Port Hedland, Western Australia. N1 went into liquidation after it passed a special resolution winding itself up. A liquidator was appointed, and under section 568 of the Corporations Act 2001 (Cth), a liquidator may disclaim onerous company land, property or contracts (under section 568(1)(a), (b) and (f) respectively).

The liquidator attempted to disclaim both the property and the mortgage agreement, purporting to disclaim a registered mortgage on the basis that it was an onerous obligation or unprofitable contract.

Justice Colvin cited well established principles of the law of escheat and third party interests following the disclaimer of property in corporate external administration and personal bankruptcy contexts. In essence, the freehold title escheats (transfers to the State) but still remains subject to any charges on the property. It is therefore incumbent on an interested party (a mortgagee, for example) to apply to a Court for vesting orders to exercise their rights.

His Honour's decision delivers comfort to mortgagees who are dealing with mortgagors experiencing financial difficulty; a registered interest under a mortgage cannot be undermined by a liquidator. In this case, the disclaimer was declared as having no lawful effect.

The process of obtaining vesting orders (under section 133(9) of the Bankruptcy Act or section 568F(1) of the Corporations Act) will ordinarily be straightforward where the interest has been registered, and Justice Colvin’s decision is a useful reminder of the importance of registering interests, particularly as the evidentiary burden is substantially lowered where an interest is registered on title.

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.