Article by Matthew Stutsel, Richard Giannone, Steven Stevens, John Pickering
On 6 May 2003, the Australian Capital Territory (ACT) Treasurer, Ted Quinlan, delivered the ACT Budget 2003-2004 (Budget). On the same day, the Revenue Legislation Amendment Bill 2003 (Bill) was introduced into Parliament to implement the stamp duty measures announced in the Budget.
The Budget proposed a number of changes to the stamp duty regime, with the following key changes to take effect from 1 July 2003:
Corporate reconstruction relief: Changing the present corporate reconstruction relief scheme from a full exemption to a 95 per cent concession on the duty otherwise payable.
Conveyance duty on business assets valued over $1 million: Increasing the rate of duty from 0.6 per cent to 5.5 per cent in respect of the conveyance of business assets (including goodwill, associated intellectual property, statutory licences and goods used solely for business purposes) valued at $1 million or more. Where the value of the business assets conveyed is less than $1 million, the rate of duty will remain at 0.6 per cent, so as to not increase the tax burden associated with the conveyance of small businesses.
Introduction of mortgage duty: Introducing mortgage duty for secured loans of $1 million or more undertaken for a commercial purpose. 'Commercial purpose' is defined as a purpose of gaining or producing income, or carrying on a business to gain or produce income. Duty will be charged at 0.2 per cent on the amount of advances secured. In his speech, the Treasurer claimed that this change was introduced because 'the ACT has become a haven for companies wishing to borrow large sums of money without paying duty'.
In contrast to the stamp duty legislation in each of the States (the Northern Territory does not impose mortgage duty), mortgage duty will apply not to an instrument of mortgage, but to an instrument that evidences an advance secured by a mortgage. That is, it is the loan rather than the mortgage that attracts duty. Further, the Bill contains claytons contract provisions, requiring a statement to be brought into existence where no instrument exists, and does not require the mortgage securing the advances to be effected or evidenced in writing. The Bill also contains an anti–avoidance provision to overcome contract splitting (ie multiple loans below the $1 million threshold are aggregated).
Subject to the matters noted above, the proposed ACT mortgage duty provisions adopt a multi-jurisdictional mortgage regime similar to that in New South Wales, Victoria, Queensland and Tasmania with concepts of mortgage package and dutiable proportion. However, the stamp duty legislation of those States presently excludes ACT secured property from their calculation of dutiable proportions. With the imposition of mortgage duty in the ACT, it remains to be seen whether these States will amend their stamp duty laws to prevent double duty in relation to property in the ACT.
Given that the 2002–2003 ACT Budget Speech claimed that conveyance rates in the ACT were being increased, effective 1 July 2002, 'to generally match the combined mortgage duty and conveyances duty imposed in NSW and other jurisdictions', it remains to be seen whether there will be reduction in the rate of duty levied on conveyances of interests in land now that mortgage duty has been introduced.
The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.
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