Mortgage duty is payable on secured lending transactions where
any of the property the subject of the security is located in New
South Wales. New South Wales is the only Australian state that
continues to levy mortgage duty, however it will be abolished from
1 July 2012.
Mortgage duty is levied at the rate of 0.4% of the amount
secured and by reference to the proportion of the secured property
in NSW relative to the total value of the secured property. On
large transactions (such as construction and development
financing), the amount of mortgage duty payable on the transaction
can be significant.
Although mortgage duty will only be abolished from 1 July 2012,
the Duties Act 1997 (NSW) ("Duties Act")
already contemplates such abolition and provides that even if a
mortgage over New South Wales property is in place prior to 1 July
2012, any additional advances made after 1 July 2012 secured by
such mortgage will not liable to mortgage duty. This is
particularly important in development financing transactions where
periodic drawdowns occur on a progress claim basis.
In relation to developments currently being considered for
funding, the payment mechanism provided for by the Duties Act can
already provide substantial benefits in reducing the total cost of
funding. Although a small cost element, the abolition of
mortgage duty in New South Wales (which will result in mortgage
duty not being levied in any state or territory of Australia) will
clearly be a positive step in secured lending transactions and may
already be able to provide benefits to borrowers (depending on the
nature of their financing arrangements).
This publication is intended as a general overview and
discussion of the subjects dealt with. It is not intended to be,
and should not used as, a substitute for taking legal advice in any
specific situation. DLA Piper Australia will accept no
responsibility for any actions taken or not taken on the basis of
DLA Piper Australia is part of DLA Piper, a global law firm,
operating through various separate and distinct legal entities. For
further information, please refer to www.dlapiper.com
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