nominates another person to exercise an option, or
nominates another person as purchaser or transferee of the
agrees to a novation of an option, or
otherwise relinquishes his or her rights under an option, so
that another person obtains a right to purchase the property.
In each instance, the transfer of an option to purchase land
will be deemed to occur. Any such transfer is already dutiable
under NSW law.
Where the new provision applies, duty is calculated on the
greater of the consideration provided for the nomination or
novation, and the value of the option.
The new duty regime applies to any call options in existence
before the date of coming into effect of the new duty regime. It is
the date of the assignment for novation of the interest in the call
option that is relevant, not the date of the underlying option
Examples of how the new stamp duty works
An option holder obtains the right to purchase land for
$1,000,000 by paying an option fee of $200,000 to the land owner.
If the option is exercised, the option fee will be credited to the
The option holder receives no
No additional duty.
The option holder is paid a $200,000
The option transfer date is deemed to be the earlier of the date
that the nomination notice is served and the date that the option
is exercised. Duty is payable on the consideration for both:
the nomination ($200,000) - with duty payable by the nominee
within three months of the option transfer date.
the property transfer ($1,200,000 ie the purchase price plus
the nomination fee) - with duty payable within three months of the
option exercise date. However, a credit will be allowed for any
duty on the nomination fee already paid.
The option agreement is "torn
up" and $200,000 is paid to the original option
Duty is payable on the consideration as
Broad meaning given to "valuable consideration"
Additional duty will be payable only where the
"transfer" is made for "valuable
It is important to remember that in a duties context
"consideration" is given a broad meaning. It includes not
only monetary compensation, but potentially whatever else may
"move the bargain". For example, consideration might take
the form of:
reimbursement of option fees paid by the original option
forgiveness of a debt owed by the original option holder;
other benefits given to the original option holder.
Date of effect of new stamp duty provisions
The new provisions were due to take effect from whichever was
the later of 1 July 2013 and Royal assent. At the time of writing
of this article, the Bill has not yet received Royal assent.
Interaction with put and call option duty
The new statutory provisions supplement but are different from
the put and call option assignment duty which imposes duty on the
option holder based on the value of the property which is the
subject of the option.
However, the new statutory regime only imposes duty on the
higher of the value of the consideration for the novation or
nomination, and the call option value.
Further, with call option novation duty, the new statutory
regime allows a credit for the duty paid under this regime against
the duty ultimately paid on the acquisition of the property.
Effectively, this just brings forward payment of part of the duty,
but does not add additional duty to the extent that duty is paid on
a reimbursement of the original option fee or any extension fees
under the option agreement.
However, the duty is additional duty where a premium is paid for
the nomination or novation.
Payment for handing over benefit of call option is not a fee
for a service
Care needs to be taken when describing the uplift fee that is
paid. If there is a genuine fee for service, then this is probably
not subject to the new duty regime.
However, parties cannot artificially categorise something as a
fee for service when it is in fact a payment for handing over the
benefit of a call option.
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