On 11 November 2008, the NSW Government released its much
anticipated mini-budget. The mini-budget contains significant
changes to stamp duty and land tax. In particular, the deferral of
the abolition of mortgage duty and marketable securities duty may
have significant ramifications for transactions planned to take
place in 2009.
Deferred Abolition of Duties
The NSW Government had previously legislated that:
unquoted marketable securities duty would be abolished from 1
mortgage duty on business loans would be abolished from 1 July
2009 (mortgage duty has already been abolished on mortgages for
owner occupied housing and investment housing), and
transfer duty on non-land business assets would be abolished
from 1 January 2011.
The NSW mini-budget defers the abolition of these duties until 1
Land rich duty
'Land rich' duty is currently imposed in NSW if a person
acquires a 'significant interest' in a private company (50%
or more) or a private unit trust (20% or more) and that entity has
land in NSW with an unencumbered value of $2 million or more
(land value test) and 60% or more of its property
is land (land proportion test).
From 1 July 2009, a 'landholder model' will be
introduced to replace the land rich duty provisions.
The Government notes in the NSW mini-budget that Western
Australia, the Northern Territory, the ACT and Queensland (for
trusts only) have already moved to adopt 'landholder
models' that impose transfer duty on acquisitions of
significant interests in entities that own land above a certain
threshold (i.e. these models do not contain a 'land proportion
test'). The NSW mini-budget states that the introduction of
this model in NSW will eliminate the need for complex valuations
and calculations and provide increased tax harmonisation between
NSW and those other jurisdictions.
The precise details of the 'landholder model' to be
introduced in NSW have not been announced. The Government states in
the NSW mini-budget that it will undertake consultation with
industry regarding the new model which will not be introduced until
1 July 2009.
From 1 January 2009, a range of nominal duties will be
increased. The Government states in the NSW mini-budget that
nominal duties on a range of documents such as duplicates of
stamped documents, collateral mortgages, deeds appointing
substitute trustees and transfers of property under a will are to
be increased from $2 to $10 and from $10 to $50. Nominal duty on
trust deeds will increase from $200 to $500.
For the 2009 land tax year, taxpayers with taxable land holdings
above $2.25 million will pay a premium land tax rate of 2% on
taxable land holdings in excess of $2.25 million. Land holdings
below this amount will be subject to the current 1.6% rate.
What does the NSW mini-budget mean for you?
Taxpayers planning transactions in anticipation of the abolition
of mortgage duty and marketable securities duty in 2009 may need to
revisit their plans and reassess the stamp duty implications.
The introduction of a 'landholder regime' may provide an
incentive for some taxpayers to undertake transactions prior to the
new rules being introduced on 1 July 2009 or to defer transactions
until after that time.
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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