Article by Richard Giannone, Steven Stevens, Matthew Stutsel
The New South Wales Budget 2003–04 (Budget) was handed down on 24 June 2003 by the Treasurer, Michael Egan MLC. The Budget contains several proposed changes to the State's stamp duty regime.
Removal of debenture trust exemption
The Budget proposes to remove the concession relating to mortgage duty for certain debenture issues, currently contained in section 226 of the Duties Act 1997 (NSW) (Act). Under that section, mortgages were exempt from mortgage duty to the extent that they secured the repayment of advances arising from the issue of debentures.
The Budget papers state:
'ordinary loans are being structured to appear
as debenture issues to exploit the maximum
concessional treatment. As genuine mortgage
backed debenture issues are now rare, the abuse
is to be eliminated by removing the concession
with effect from 24 June 2003'.
This amendment (and changes to other State revenue laws proposed by the Budget) are contained in the State Revenue Legislation Amendment Bill 2003 (NSW).
Accordingly, the concession will not apply to mortgages first executed on or after 24 June 2003.
Critically for security structures put in place prior to 24 June 2003, the Bill means that the concession no longer applies in relation to debentures that are subscribed for on or after 24 June 2003. Additional advances secured by relevant mortgages will give rise to a liability to ad valorem duty, with the mortgages taken to be stamped with duty in respect of those debentures that had been subscribed for in New South Wales prior to 24 June 2003. This will have significant implications for structures under which debentures were subscribed for outside New South Wales.
Changes affecting transfer and land-rich duty
The Budget papers state:
'A growing number of transactions and mechanisms
involving companies and unlisted unit trusts are being
used to avoid paying stamp duty on the acquisition
of interests in land.'
The papers note that Treasury is developing additional anti-avoidance measures, in consultation with the property industry. The New South Wales Government is also reviewing the definition of 'public unit trust scheme', being a category of trust to which land-rich provisions do not apply.
These changes are proposed to take effect from the introduction of amending legislation (which is yet to be drafted).
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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The income tax treatment of any property lease incentive will vary, depending on the nature of the inducement provided.
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