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28 Jun 2010

New duty concessions and exemptions from 1 July 2010

The State Revenue Legislation Amendment Act 2010 (NSW) amends the Duties Act 1997 (NSW) by amongst other things establishing a new duty concession scheme for new housing, called the NSW Home Builders Bonus (Scheme) which will apply from 1 July 2010. The Scheme provides a "New Housing Concession" and a "Seniors Principal Place of Residence Duty Exemption" in New South Wales.

The Duties Amendment (NSW Home Builders Bonus) Bill 2010 makes further provision in relation to the Scheme. This bill has passed all stages of the NSW Parliament without amendment and awaits Royal Assent.

When will these transfer duty concessions and exemptions apply?

Eligible purchasers can claim the concession or exemption for eligible agreements for sale of land or transfers of land (other than transfers made in conformity with an agreement for sale or transfer entered into before 1 July 2010) entered into between 1 July 2010 and 30 June 2012.

New Housing Concession

New home purchase - post-construction transfer duty reduction

  • The ad valorem transfer duty payable on an agreement for sale or transfer of land on which there is a "new home" that is complete and ready for occupation will be reduced by 25%.
  • A new home is a home that has not been previously occupied or sold as a place of residence.
  • A "substantially renovated home" that is new residential premises within the meaning of section40‑75(1)(b) of the A New Tax System (Goods and Services Tax) Act 1999 and that has not been occupied or sold as a place of residence in its renovated state previously, is considered a "new home" for the purposes of this concession and for the off the plan purchase exemption below.
  • The value of the new home must not exceed $600,000.

Off the plan purchase - pre-construction transfer duty exemption

An agreement for sale or transfer of land that is intended as the site of a new home to be built before completion of the agreement, but construction has not commenced at the date of the agreement, is exempt from transfer duty (a full exemption) if the value of the off the plan purchase does not exceed $600,000.

Construction of a new home commences with the laying of the foundations of the new home or of the building.

This exemption also applies to an off the plan purchase if:

  • it replaces another off the plan purchase that was approved under the Scheme, whether or not construction has commenced;
  • construction of the new home commenced when the land was owned by a person who is not the vendor;
  • no more than 25% of the construction work has been completed; and
  • no construction work in relation to the new home has been carried out between the date that the vendor acquired the land and the date the off the plan purchase was entered into.

An application can be made under the Scheme where the agreement for sale or transfer of land is entered after 1 July 2012 and that off the plan purchase replaces an off the plan purchase that was approved under the Scheme and only if the agreement relates to substantially the same land, and the purchaser(s) are the same (Off The Plan Replacement Agreements).

Vacant land purchase - transfer duty exemption

An agreement for sale or transfer of vacant land that is intended to be used as the site of a new home (and which is not an off the plan purchase) is exempt from transfer duty (a full exemption) if:

  • the value of the vacant land does not exceed $400,000; and
  • laying of foundations commences within 26 weeks after the agreement for sale or transfer is completed or when a transfer is executed otherwise than in conformity with an agreement for sale or transfer (or any longer period allowed by the Chief Commissioner).

There is no limit on the number of new homes a person may purchase under the New Housing Concession.

Does the Scheme apply to replacement agreements?

Except in the case of Off The Plan Replacement Agreements, an agreement for sale or transfer will not be eligible if it replaces an agreement made before 1 July 2010 and the replaced agreement is an agreement for the sale or transfer of substantially the same property (eg. if a contract for sale is mutually rescinded and a new contract for sale with identical terms is entered into after 1 July 2010, that contract will be ineligible).

Restrictions on eligibility

An agreement or transfer of a new home purchase, off the plan purchase or vacant land purchase is not eligible under the Scheme if the new home or the land on which the new home is located or to be built is intended to be used, or made available for use, that is not for "residential purposes" (a farming property is not excluded).

Are First Home Buyers eligible?

A First Home Buyer can apply for either the Scheme or the First Home Plus Scheme but not both.

A First Home Buyer can apply for the First Home Owner Grant in addition to the Scheme.

Seniors Principal Place of Residence Duty Exemption

Seniors can apply for the exemptions and concessions under the New Housing Concession.

An "eligible senior" (ie. a person aged 65 or over who is an Australian citizen or permanent resident, and who has never previously received (and whose spouse/partner has never previously received) the Seniors Principal Place of Residence Duty Exemption) is entitled to a full transfer duty exemption under the Seniors Principal Place of Residence Duty Exemption if an agreement for sale or transfer falls within the New Housing Concession (ie a new home purchase or an off the plan purchase where construction has commenced) and:

  • all purchasers are aged 65 or over (or if a married or de facto couple, one of them is aged 65 or over);
  • the eligible senior (and spouse/partner) move into the home within 12 months (or a longer period allowed by the Chief Commissioner) after completion of the agreement or transfer and occupy it as their principal place of residence for a continuous period of at least 12 months;
  • the eligible senior owned and occupied a home in New South Wales within the 12 month period before the date of the agreement for sale or transfer;
  • the eligible senior disposes of their former home before or within six months after completion of the agreement for sale or transfer (or a longer period allowed by the Chief Commissioner); and
  • the value of the property does not exceed $600,000.

When do applications have to be made?

Applications for duty concessions and exemptions under the Scheme must be made within three months (or any longer period allowed by the Chief Commissioner i.e. where circumstances are beyond the control of the applicant) after the date of the agreement for sale (or transfer, if no preceding agreement exists). The Chief Commissioner may approve an application in advance in relation to proposed agreements or transfers.

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Disclaimer

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.