Property Purchases: 'Win Some Lose Some' in New State Taxes Amendments
A Bill has been introduced into the NSW State Parliament that proposes to introduce various stamp duty and land tax amendments. The Bill is yet to be debated in the Legislative Assembly.
Some of the proposed amendments are discussed below.
Put and Call Option Assignment Duty
The Bill proposes to modify the stamp duty treatment of assignment duty on put and call options.
If passed, the Bill will broaden the scope of the provisions to include a right of the option-holder (grantee) to direct the owner of the property (grantor) to sell to a third-party where the grantee does not have a right to purchase the land itself but merely a right to direct the grantor to sell to another person (called a 'put and direction' agreement).
Anybody wishing to rely on 'put & direction' agreements to nominate third party purchasers should immediately review those arrangements and, in particular, whether their future nominations will be protected by the special transitional rules.
The Bill also proposes two new exemptions for assignments of call options. The exemptions apply to assignments by:
a licensed builder in connection with the building of or an agreement to build residential premises; or
a corporation who is a member of the same 'corporate group'.
aggregation of dutiable transactions
The Bill proposes to introduce a new qualification on the aggregation provisions (which allow the Office of State Revenue to assess duty on contracts forming part of the same 'arrangement' as if they were contained in a single contract). The existing provisions are aimed at preventing tax avoidance by 'contract splitting'.
If passed, the Bill will ensure that the aggregation provisions only apply where the seller (transferor) under each of the transactions is the same (or they are associated). This is good news for property developers acquiring contiguous lots from unrelated purchasers.
However, the benefits of this concession will be reduced by the proposed deletion of the Chief Commissioner's discretion not to aggregate where it is 'not just and reasonable'. This general discretion will be replaced by a more specific exemption for acquisitions of vacant land by authorised home builders.
land-rich duty and timing of acquisition of interest in company or unit trust
The Bill also proposes to introduce amendments aimed at preventing schemes to defer or minimise stamp duty on acquisitions of landholding entities by relying upon the decision in Affinity Health Ltd v Chief Commissioner of State Revenue, where it was held that the acquisition of shares in a landholding company occurs upon registration.
Anyone considering entering into such an arrangement should carefully consider the potential impact of the proposed amendments.
The income tax treatment of any property lease incentive will vary, depending on the nature of the inducement provided.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).