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01 Feb 2012

PPS-driven exemption from S.A. stamp duty for securitisations announced

Securitisation transactions have historically been structured in a manner so as not to attract ad valorem stamp duty in any Australian State or Territory. This was achieved through the adoption of Clayton's contracts (which permits an offer to assign receivables to be accepted by conduct alone without requiring that the acceptance be evidenced in writing).

Over time, each Australian State and Territory (other than South Australia) either abolished, or afforded exemptions from, any ad valorem stamp duty applicable to securitisation transactions, thereby reducing the necessity for securitisation transactions to rely upon Clayton's contracts.

By contrast, South Australia did not offer a broad exemption in respect of ad valorem stamp duty arising in respect of securitisation transactions (it offered a limited transfer of mortgage exemption). Accordingly, the Clayton's contract (essentially redundant in the other Australian States and Territories) was retained largely for its continued relevance in South Australia.

However, the enactment of the Personal Property Securities Act 2009 (Cth) (the PPS Act) gave cause for concern for securitisation transactions which would effect assignments of receivables located in South Australia (Relevant Securitisation Transactions) following the commencement of operation of the PPS Act on 30 January 2012 (the PPS Start Date).

Under the PPS Act, one of the requirements for a perfected security interest is that it can be "enforced" (ie. defended) against third parties. There has been a real concern whether a Clayton's contract can satisfy the requirements of the PPS Act. This has led to a desire to amend documentation to allow acceptance in writing.

Parties to Relevant Securitisation Transactions faced a Catch 22; on the one hand, it would be economically desirable to continue to effect assignments by way of Clayton's contracts (and not evidence the assignment in writing) for the purposes of South Australian stamp duty, while on the other hand it would be desirable to ensure that the "security interests" arising under the PPS Act would be enforceable against third parties.

Accordingly, in a letter dated 7 February 2011, the Australian Securitisation Forum (the ASF) made a submission to the Treasurer of South Australia in respect of the application of the South Australian Stamp Duties Act 1923 and the dilemma that would be faced by parties to such Relevant Securitisation Transactions on and after the PPS Start Date.

Yesterday (31 January 2012), the Commissioner of State Taxation announced in Revenue Ruling SDA004 that ex gratia relief will be granted to securitisation transactions that would otherwise be dutiable in South Australia on or after the PPS Start Date, provided that such securitisation transactions comply with the requirements set out in the Ruling, thereby paving the way for securitisation transactions to dispense with the Clayton's contract (and thus permit the requirements of the PPS Act to be satisfied without material economic sacrifice).

The announcement is sure to be welcomed by the securitisation industry, providing certainty to the parties to a securitisation transaction that involves any assignments of receivables located in South Australia.

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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.