A duty payable under Duties Act 1997 (NSW) often adds a significant cost to a transaction that needs to be considered when planning and structuring your private or business transactions.
On 1 July 2016, the abolition of a number of duties in NSW promised for many years and introduced into Duties Act 1997 (NSW) in 2014 by State Revenue and Other Legislation Amendment (Budget Measures) Act 2014 (NSW) will finally come into effect.
The major duties being abolished in NSW starting from 1 July 2016 include mortgage duty, business assets duty and marketable securities duty. In this respect, if you are planning to enter into an agreement involving a mortgage or purchase of a business or the transfer of shares or units in a trust, it may save your cost to do so on or after 1 July 2016.
What follows is an overview of the abolition of certain duties in NSW coming into effect in the new financial year.
1. Mortgage Duty
Duty on all mortgages is abolished from 1 July 2016. Mortgages executed on or after 1 July 2016 will not be liable to duty. Duty is not payable on further advances made on or after 1 July 2016, irrespective of the date of the mortgage.
Furthermore, no duty will be payable on caveats protecting interests under unregistered mortgages executed on or after 1 July 2016.
Stamping or marking mortgage documents will not be required in respect of any of the above. They can be registered at Land and Property Information without such stamping or marking.
2. Business Assets Duty
The following types of business assets cease to be dutiable property from 1 July 2016:
2.1 A ‘business asset’ being:
2.1.1 the goodwill of a business, if the business has supplied goods or services in NSW to a customer of the business during the previous 12 months;
2.1.2 intellectual property that has been used in NSW during the previous 12 months where it is the subject of an arrangement including a dutiable transaction over the goodwill noted in (2.1.1);
2.1.3 a statutory license or permission under a Commonwealth law, if the rights under the license or permission have been exercised during the previous 12 months in respect of NSW,
2.2 A statutory licence or permission under a NSW law (for example a taxi licence or water access licence)
2.3 A gaming machine entitlement within the meaning of Gaming Machines Act 2001 (NSW).
Consequently, no duty is payable on the value of the above types of business assets that are included in dutiable transactions entered into on or after 1 July 2016. However, the following types of business assets remain dutiable property and their transfer will continue to be subject to duty from 1 July 2016:
- land and an interest in land in NSW (including a leasehold interest and fixtures); and
- goods in NSW (subject to certain exclusions, e.g. stock-in-trade, listed in section 11(1)(j) of the Duties Act 1997 (NSW)), if the subject of an arrangement that includes a dutiable transaction over other dutiable property, e.g. land.
3. Marketable Securities
The following types of marketable securities cease to be dutiable property and their transfer will not be subject to duty from 1 July 2016:
3.1 Shares in a NSW company and shares in an overseas corporation that are kept on a register in NSW;
3.2 Units in a unit trust scheme being units:
3.2.1 registered on a register kept in NSW;
3.2.2 that are not registered on a register kept in Australia but in respect of which the manager or trustee of the unit trust scheme is a NSW company or a natural person resident in NSW.
However, duty on certain acquisitions of shares or units in landholders remains liable to duty under Chapter 4 of the Duties Act 1997 (NSW). In this respect, a landholder is a unit trust scheme, a private company or a listed company that has land holdings in NSW with a threshold value of $2,000,000 or more. Therefore, while marketable security duty is not payable on the share or unit acquisition from 1 July 2016 their acquisition can attract landholder duty.
4. Duties Remaining in Effect
Importantly, the above noted changes do not result in abolition of:
- duty on transfer of land or interest in land;
- landholder duty as outlined above;
- duty on transfer of shares or units in a company title dwelling giving their owner an exclusive right to occupy a part of a building;
- duty on transfer of land use entitlements conferred through an ownership of shares in a company or an ownership of units in a unit trust scheme together with a lease or licence, which remain effective from 1 July 2016.