From 1 July, New South Wales will not only be the only state in
Australia that still imposes duty on mortgages, but will also seek
to raise more revenue by broadening the operation of the existing
These new revenue raising initiatives are part of the State
Revenue Legislation Further Amendment Bill 2009 which is
expected to operate from 1 July 2009. The provisions are complex,
so in this update we do not deal with the provisions in detail.
How duty will be applied to limited securities becomes
Note structures and other 'no advance' structures will
be subject to mortgage duty
Additional duty may be payable in respect of further advances
under existing multi state facilities
Wide anti-avoidance provisions apply.
The new provisions apply to mortgages executed on or after 1
July 2009 and to advances made after 1 July 2009 in connection with
If you have arrangements which may be impacted by these
initiatives, contact us urgently so that suitable arrangements can
be made prior to 1 July 2009.
Under the current law, if a mortgage specifies a specific
amount, duty is payable on that amount. For example, a borrower may
owe a lender $10m but the parties agree to give security for only
$1m of those advances. Put another way, recourse under the mortgage
is limited to $1m. Until 30 June 2009, mortgage duty would be
payable on $1m not $10m.
From 1 July 2009, it appears that mortgage duty will be payable
on $10m. If further advances are made under an existing limited
recourse mortgage, mortgage duty becomes payable on the whole
advance. The drafting is not clear on this issue, and as it has not
been expressly mentioned in any supporting material. We will be
lobbying for clarification.
If the new law operates as we describe above, this represents a
fundamental shift in the way mortgage duty is assessed. This
measure goes beyond mere anti-avoidance provision and broadens the
tax net to impose duty on unsecured, or partially unsecured,
Note structure and 'no advance' arrangements
The Bill will sound a death knell for note structure
arrangements that have become commonly used for project
The proposed amendments catch these note structure arrangements
by charging duty on the amount of any advances made under an
"agreement, understanding or arrangement" for which the
mortgage is security, whether or not the advance is recoverable
under the mortgage.
Further advances – retrospectivity and double duty
for multi-state mortgages
Currently, when security is taken over assets in a number of
states, credit is given for duty paid outside NSW. However, under
the amendments, when additional advances are made after 30 June
2009, mortgage duty will charged on the total advances (pre and
post 1 July 2009) with limited or no credit for duty paid in other
General anti-avoidance provisions
The general anti-avoidance provisions (GAAP) are designed to
deter artificial, blatant or contrived schemes that may otherwise
reduce, avoid or postpone liability for duty.
The broad scope of the GAAP will increase uncertainty for
parties that enter into legitimate commercial arrangements which
produce a more favourable stamp duty result or which defers the
ultimate liability for stamp duty.
This part will cover the legal position in relation to promotional materials and misleading and deceptive conduct.
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