Australia: Stamp duty and withholding taxes in New South Wales

Last Updated: 5 November 2016
Article by Watkins Tapsell

There have been a number of changes to the laws in regarding what stamp duty and taxes are payable on land sales and business sales. These changes will make some transactions cheaper, but will make others more expensive. The changes are at both the State and Federal level.

Stamp Duty

Stamp duty has gone down....

Stamp duty changes will make the process cheaper for some transactions. Stamp duty on the following transactions have been removed:

  • sale and purchase of businesses
  • mortgages
  • transfer of shares

These changes are effective for any transfer that takes place after 1 July 2016. Any transfer that is dated prior to 1 July 2016 will still attract stamp duty at the old rates. If purchase of land takes place, together with a purchase of a business operated from that land, then stamp duty is still payable on the purchase of land portion of the transaction. An apportionment is required in the price to work out what portion of the sale price is subject to stamp duty. Stamp duty may still apply to other business sale related documents such as transfers of leases.

Stamp duty has gone up...

There have also been stamp duty changes in NSW which increase the amount payable on purchases of residential real estate. If the purchaser is a foreign person, a 4% stamp duty surcharge will apply to the transaction. This applies even if only one of the purchasers is a foreign person. The surcharge will be payable on the proportion of the property that the foreign person will hold after the transfer. For example if a husband and wife are purchasing a unit together as tenants in common in equal shares, and one of them is a foreign person for the purposes of stamp duty, they will pay the surcharge on 50% of the value. A foreign person will include someone on a bridging visa notwithstanding that they are married to an Australian citizen. The surcharge can result in substantial additional duty being paid on a purchase. These changes are effective for any transfer that takes place after 21 June 2016.

Stamp Duty Generally....

Documents to be stamped or marked exempt from stamp duty may generally be stamped by agents on behalf of the Office of State Revenue. This is a process that we have been involved in as agent for the Office of State Revenue for over five years. The Office of State Revenue also now requires a Statutory Declaration to be completed as part of the stamping of any land purchase. This must be completed by each of the Purchasers.

Withholding Taxes – Where the price is greater than $2,000,000

Another change to the process involves the sales of land, shares or businesses where the price is $2,000,000.00 or more. If a sale of $2,000,000 or more is to take place, then the vendors must each obtain a clearance from the ATO stating that they are not a foreign resident. If they obtain the clearance from the ATO and provide a copy to the purchaser then the transaction proceeds as normal. If they do not obtain the clearance then the Purchaser at completion must pay 10% of the price to the ATO. This obligation to pay 10% of the price is pursuant to the ATO requirements.

It is important to consider this when entering into contracts. For example, the right to reduce the price by 10% is in the 2016 form of standard contract. If a previous form of contract is used then the right to reduce the price is not included. The obligation on the purchaser to the ATO still exists. This can then create problems for both vendor and purchaser if the Vendor does not obtain the ATO clearance. Buying or selling land, a business or shares is a complicated process, and you should ensure that you are getting the right advice. If you have a question about buying or selling real estate, shares or a business asset, contact our commercial property and business lawyers....

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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