Qld Stamp Duty Changes: The Good And The Bad.. Top Duty Rate Increases To $5.25 Per $100

The Treasurer, Andrew Fraser, has handed down the 2008/2009 State Budget which contains various changes to stamp duty for businesses dealing with Queensland property.

While the budget has brought forward the abolition of mortgage duty in Queensland by six months, and contains reductions in stamp duty for some home buyers and retirement village residents, the sting in the tail is an increase in duty rates which will affect business transactions over $590,000. This will affect sales of real property, business acquisitions, land rich share transactions, dealings in certain trusts and partnerships, as well as other dutiable transactions.

A brief summary of these changes is set out below.

the bad news...

higher rates of transfer duty for transactions over $590,000

The new transfer duty structure, which will take effect from 1 July 2008, is as follows:

The new rates will lead to duty savings for transactions under $590,000, but higher duty for transactions in excess of that amount, with the top marginal rate increasing from $4.50 to $5.25 per $100. While the Budget Papers claim that the new structure "generally improves competitiveness with other states", this is not the case for high value transactions where Queensland is closing the gap on other jurisdictions.

For example, the following table compares the duty payable under the old and new rates, as well as NSW and Victoria:

* premium property duty is payable in NSW on dutiable transactions for residential land where the dutiable value exceeds $3 million.

which rates apply?

The rates applicable to a transaction will depend on whether liability for stamp duty arises before or after 1 July. For example, if a contract for sale of land is signed on or before 30 June, the old rates will apply (irrespective of whether settlement occurs on or after 1 July), whereas the new rates will apply where an option in relation to land or business assets is exercised on or after 1 July. In some cases, it may be advantageous to sign contracts or exercise options on or before 30 June, so the old transfer rates apply.

the good news...

early abolition of mortgage duty

The Budget has brought forward the abolition of mortgage duty to 1 July 2008, six months earlier than scheduled. These changes mean that Queensland mortgage duty will not be payable on:-

• mortgages signed on or after 1 July 2008;
• interstate mortgages where Queensland property is first included as secured property after that date (eg. newly acquired property or property owned by a cross-guarantor);
• advances or further advances made on or after 1 July 2008 under a mortgage signed before that date.

Some duty may still be payable outside Queensland where secured property is located in a state or territory where mortgage duty is yet to be abolished. Duty will remain on caveats and releases relating to mortgages with unpaid duty.

savings & refunds?

While the rate of mortgage duty was halved from 40c to 20c per $100 on 1 January 2008, it may be possible to save further mortgage duty where the making of advances under a mortgage can be deferred until after 30 June 2008.

As mortgages, and particularly corporate group securities, are commonly stamped up to a maximum amount prior to all advances being made, some mortgagors may also be entitled to apply to the Office of State for refunds of 'unused duty' where some or all of the advances have not been made by 30 June 2008. Applications for refunds must be made by 31 December 2008.

concessions and exemptions for home buyers and retirement village residents

The budget measures include:-

• an increase in the threshold for the first home buyers duty exemption, from $320,000 to $350,000 (from 1 July 2008) and then to $500,000 (from 1 September 2008);
• an increase in the ceiling for the principal place of residence concession from $320,000 to $350,000; and
• an extension of the principal place of residence concession to retirement village residents who adopt lease and sub-lease occupancy arrangements.

When combined with the new duty rates, these concessions and exemptions will reduce the duty payable on homes valued between $320,000 and $1 million. However, the changes will not apply to a contract which replaces a contract signed before 1 July, nor contracts arising from options granted on or before 30 June.

If you require advice on the impact of these changes on current or planned transactions, or applying for a refund of mortgage duty, please contact our office to discuss.

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.