Changes to the NSW Duties Act 1997 will ensure that an
acquisition of an option to purchase NSW land by way of nomination
or novation for valuable consideration is taken to be a transfer of
the option and a dutiable transaction. As it is common in NSW for
there to be nominations made in respect of options to purchase
land, rather than those options being assigned or transferred, this
is a significant change of which those involved in real estate
transactions should be aware.
This change was first introduced over a year ago as a result of
the NSW Supreme Court decision in CTI Joint Venture Company Pty
Ltd v Chief Commissioner of State Revenue  NSWSC 20.
This case involved the grant of call options over land at Chatswood
that included a nomination clause. A third party was nominated
under the call option and the Chief Commissioner sought to assess
the nomination as a separate dutiable transaction to the transfer
of the land on exercise of the option. The court held the
nomination was not a separate dutiable transaction.
Under these amendments a transfer of an option to purchase NSW
land will be taken to occur if for valuable consideration:
another person is nominated to exercise the option; or
another person is nominated as purchaser or transferee of the
land the subject of the option on or before the exercise of the
the option holder agrees to a novation of the option, or
otherwise relinquishes rights under the option, so that another
person obtains a right to exercise the option or to purchase the
On exercise of the option, the consideration paid for the
transfer of NSW land will include the value of any consideration
paid by the purchaser for the acquisition of the option.
To avoid the payment of double duty that would arise on the
inclusion of the value of the option in the value of the NSW land
purchased, the amount of duty paid on purchase of the land on
exercise of the option is reduced by the amount of any duty paid by
the purchaser on transfer of the option to the purchaser.
These amendments only apply to options granted or otherwise
created on or after the commencement of the provisions being 23
October 2014 which was the date of Royal Assent.
Developers should consider these provisions when nominating or
novating under an option to purchase NSW land and the duty
consequences that will arise at that time. These amendments may not
change the overall amount of duty payable for the land but may
change the time at which the duty is paid.
Novation of Agreement for lease
Duty will be payable on the novation of an agreement for the
lease of NSW land as if it were a transfer of dutiable property.
This amendment ensures that a novation of an agreement for the
lease of NSW land is not used as a way of avoiding duty on a
transaction that has a similar effect to transferring a lease of
NSW land which is a dutiable transaction.
The new lessee will be liable for duty on the novation of the
agreement for lease.
This amendment applies only to a novation of an agreement for
lease that occurs on or after 23 October 2013.
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